1998 financial markets stabilized and we did not see the continuing disruptions to intermediation and spending that concerned us after the initial market shock had taken place. and in the last year or so economic growth has strengthened and the possibility of destabilizing deflation receded. omitted from my list of examples of low - probability, high - impact events that the federal reserve has addressed with monetary policy are episodes in which a possible substantial deviation of key asset prices from fundamentals threatens future disruption when those prices correct. the reason for the omission is that i know of no such episodes in the past few decades. our monetary policy certainly takes into account the effects of asset prices on the likely course of the economy and prices. but we have not attempted to damp fluctuations in asset prices by tightening or easing policy more than the medium - term macroeconomic outlook implies. in concept, a significant deviation of important asset prices from fundamental values raises the risk of a future reversal that would add to economic volatility, representing a low - probability event that, like many others, could be given some weight in the stance of policy. but we have been deterred by a number of uncertainties about dealing with this possibility and a consequent lack of confidence that the benefits of policy action in these circumstances would outweigh the costs. among other things, we are uncertain ( a ) about any judgment that the level of a particular class of asset prices is moving far enough away from fundamentals to make a correction inevitable and disruptive ; ( b ) about the timing of a reversal of those prices, so that a step to truncate a movement, say by raising rates in response to a perception that the prices of some assets were becoming unsustainably high, does not increase economic instability by hitting the economy and asset prices just as the reversal occurs ; and ( c ) about the response of asset prices, possibly driven by self - fulfilling optimism for a time, to a change in rates. as a result of this last unknown, one has difficulty assessing whether a change in policy large enough to prevent asset - price disequilibrium would have a greater adverse effect over time on economic performance than would allowing asset prices to evolve. moreover, we have also recognized that much of the extra damage that rapidly changing asset prices may inflict occurs through weakening the financial system enough to cause a constriction in credit flows that restrains spending. this potential problem can be addressed, in part, through the

ong chong tee : banking supervision - the path ahead opening address by mr ong chong tee, deputy managing director ( financial supervision ) of the monetary authority of singapore, at the 13th asia - pacific high level meeting on banking supervision, singapore, 28 february 2018. * * * mr agustin carstens, general manager, bis mr fernando restoy, chairman, fsi mr william coen, secretary general, bcbs ms chuchi fonacier, chairman, emeap wgbs and deputy governor, bsp distinguished guests, ladies and gentlemen, 1 good morning. my colleagues and i at the mas are pleased to host this 13th asia - pacific high level meeting on banking supervision. it is also my honour to be able to offer some remarks to precede the interesting panel sessions over the next two days. basel iii reforms 2 it has been a decade since the 2008 global financial crisis. since then, wide - ranging regulatory reforms have been formulated to further safeguard the stability and functioning of the global financial system. one major set of the reforms is the basel iii standards for banks ; and this includes boosting capital buffers, new liquidity requirements and limiting overall leverage. the financial stability board ( fsb ) also led work to address “ too - big - to - fail ” concerns. global systemically important banks ( g - sibs ) are now subject to higher capital, more intense supervision, and resolution planning requirements. 3 the recent finalisation of the 2017 basel iii reforms complete the post - crisis banking reform agenda. the basel committee and global banking regulators have shifted focus to implementation of the revised standards. given the considerable attention on the basel iii reforms, it is easy to forget that a core mandate of the basel committee is with respect to its work on supervisory practices. 4 so this morning, allow me to share some thoughts on three areas with respect to banking supervision : i. the next phase – beyond the review on capital and liquidity rules ; ii. banking supervision as a craft ; and iii. supervisory challenges and opportunities. the next phase 5 as many of us will be familiar, the basel iii framework has a second pillar that pertains to risk management and supervision including accounting for risks not captured under pillar 1. indeed, the basel committee devotes considerable attention to various pieces of work under this pillar, such as on stress testing, accounting standards, corporate governance and supervisory colleges. disclosure requirements are further reviewed under pillar 3 to foster market discipline. 6 following the recent finalisation