special purpose vehicle created for the sole purpose of holding the assets and issuing securities. similarly, investors provide cash in repo transactions because, even if the institution receiving the cash were to default, the institution providing the cash would have a claim on the underlying asset. in other cases, shadow banking assets are perceived to be safe because of the narrow range of activities in which they engage. for example, mmfs provide a close substitute for bank deposits, partly because they invest only in very liquid, short - term, low - risk securities. other shadow banking institutions, such as credit hedge funds and finance companies, have structured their assets and liabilities in various ways to avoid being subject to runs. thus, shadow banks have a variety of business models to maintain investors ’ confidence and obtain access to financing. these models are different from those of regular banks, and from one another. so what is the advantage of shadow banking, given that banks already exist? for some forms of intermediation, shadow banking may be more efficient and provide healthy competition for traditional banks. room on banks ’ balance sheets is expensive, so avoiding the use of those balance sheets can save money and free up lending capacity. the regulations to which banks are subject may also give them less flexibility to serve some sectors of the market, or at least restrict their ability to offer those customers a competitive package. where banks do not tread, shadow banking steps in to fill the gaps and make the financial system more efficient. a financial system with a diverse set of business models may be both more innovative and more resilient. and, given that banks are often highly interconnected, there may be an advantage, in the interest of financial stability, to transferring some risk outside of the banking system. in particular, by using market mechanisms to distribute and diversify this risk, it will end up being borne by those investors most willing to hold the risk. at the same time, shadow banking can be a form of regulatory arbitrage, circumventing the regulations to which banks are subject. such behaviour can create distortions and additional risks to the system. as bank regulations are tightened, the incentives for such behaviour obviously increase. bis central bankers ’ speeches while banks and shadow banks have separate functions and activities, it is important to remember that their paths intersect. shadow banking relies on traditional banks. many forms of shadow banking, such as asset - backed commercial paper and related structured products, often require support from banks through liquidity lines to bring them to

being undertaken to promote a more favorable business and investment climate. let me end by saying that overcoming the challenges we face can be made easier if we maintain an open line between private enterprises and the government sector and recognize the important role each one has to play. this is the reason why the bsp is taking the initiative of bringing us together regularly in this exporters ’ forum. previous discussions had been quite fruitful and in fact yielded positive results for some. i hope this forum will be productive and will serve to open more avenues for mutual linkages within the export industry. thank you very much and i look forward to hearing your views.