the liquidity support arrangements and deposit insurance, has also been widely acknowledged, as is the need for greater disclosure and transparency, particularly on off - balance sheet exposures. these have also been the areas of focus of most of the authorities in emerging asia as we set to modernise our financial systems post the asian financial crisis. in other areas, there has been substantial debate by the international community. the first concerns the degree of balance of regulation. this crisis has shown that market discipline needs to be complemented by regulation. the question however has centred on how far the pendulum should swing towards greater regulation. should regulatory constraints be imposed on size, leverage and activities of financial institutions? this would have significant implications on the role of the financial sector in the overall economy. the main reservation with such reforms has been whether they will in fact deliver greater financial stability beyond more basic and well designed changes to the regulatory architecture. it also raises the question as to whether it would significantly raise the cost of financial intermediation. a central piece of the ongoing international debate on the regulatory reform agenda is the proposal on limiting the size of institutions. whether this in itself will effectively reduce systemic risks has yet to be demonstrated. the experiences of australia and canada which have highly concentrated banking systems suggest that the control of systemic risk has less to do with size, and more to do with the effectiveness of risk management and supervision of the large institutions. malaysia shares this view. following the asian financial crisis, measures were taken to prompt the consolidation of our banking sector, thus creating larger institutions with enhanced capabilities not only to operate effectively in the domestic financial system but also beyond domestic borders. the focus is to emphasise on the investment in the risk management capabilities of not only management but also the board of the institutions. it is plausible that artificial restrictions on size or scope could result in a shift of systemic risks to closely inter - connected networks of smaller institutions which collectively pose a similar degree of systemic risk. emerging economies have great interest in the direction of these reforms. for the emerging economies in asia, the banking system remains the largest component of the financial system. regulatory, supervisory and legal reforms have generally focussed on effective governance and commensurate risk management capabilities. in malaysia, the banking system leverage ratio is less than 11 times while the banking system risk - weighted capital ratio is 14. 1 % with tier - 1 capital at 13. 6 %. equally important is the incentive structure in place for such financial institutions, the level of transparency and

- year 1. 0 10 - year 5 - year 0. 8 transaction volume in jgb markets 6 - months backward moving average " high " - " low ", % points improve - 10 0. 6 0. 4 market functioning ( bond market survey ) transaction volume in jgb markets cy 2016 - 2017 average - 20 - 30 - 40 0. 2 0. 0 cy13 14 15 16 17 18 19 20 21 cy 13 14 15 16 17 18 19 20 21 notes : 1. in the left - hand chart, figures are maximum minus minimum values in jgb yields within the past 6 months. 2. in the middle chart, figures are the gross amount of outright purchases by banks, investors, and bond dealers. sources : bloomberg ; japan securities dealers association ; bank of japan. - 50 - 60 cy15 chart 11 ii. motivation and thinking behind the assessment flexible purchases of etfs and j - reits 2. 0 tril. yen bil. yen 50 covid - 19 etfs ( left scale ) 1. 6 j - reits ( right scale ) 1. 2 0. 8 0. 4 0. 0 jan. mar. may. may jul. july sep. sept. nov. jan. source : bank of japan. 11■