their impact on financial stability, so that the development of new products should be compatible with adequate prudential regulation. for instance, access to credit derivatives is limited and all over - the - counter derivatives that have a supervised entity as counterparty have to be registered and monitored. the continuous review and update of the prudential regulatory framework is a priority for us. an example of a recent early prudential action occurred in june 2007, well before the recent financial turmoil aggravated : the central bank established a foreign exposure capital requirement for cross - border positions within international banking groups. in a nutshell, the brazilian approach insulated its financial institutions from the sort of problems that is affecting counterparties abroad. in fact, it is no coincidence that our financial system has shown resilience and has been largely unaffected during the current financial turmoil. the overall assessment on the brazilian regulation framework, which was sometimes criticized on the grounds of excessive carefulness, is currently praised in international forums. for instance, the fact that brazilian regulators have access to information from the clearing systems of all operations in the financial market is a factor of admiration and reference worldwide. before closing, let me mention that i strongly welcome the recent enlargement towards emerging economies – including of course brazil – of the financial stability forum ( fsf ) and of the basel committee on banking supervision ( bcbs ). emerging economies rapidly increasing weight in the global economy and global finances makes them an integral part of any viable solution to the current problems, as we are witnessing today in regard to their role in the g - 20. the enlargement of forums in the area of regulation and financial sector supervision give more legitimacy to the discussion being held, with a view to design a new and more robust regulatory framework. i believe we need to have this new framework in place by 2010, as the current crisis is left behind, hopefully, and growth and stability are restored. as part of the work program already laid down in the g - 20, critical points in the reform include the need to make regulatory capital more neutral over - the - cycle, by integrating the macro prudential framework into the required capital of individual institutions ; the need to reach, with prudential regulation and supervision, all quarters of the financial industry ; and the need to enhance transparency of financial instruments and markets. thank you very much.

to nought the hard - fought gains. the amendment refers directly to cash transactions but has far - reaching implications. has cbk acted to implement the amendment? yes, cbk first saw the amendment after it had become effective, but embarked on understanding and implementing it. to be clear, cbk had not been made aware or otherwise consulted in formulating the amendments, so we had no lead time. the initial objective was to gather in one place all regulations concerning cash deposits and withdrawals. significant difficulties emerged right away, one of which is that the stipulated timelines were impossible – the existing regulations just could not be brought together, reviewed by the public, reviewed by the attorney general, then brought to parliament and then made effective all within 30 days. in fact, theoretically it takes a minimum of 90 days but in practice recent legislations have taken 11 / 2 years and more. in the circumstances we sought guidance from the attorney general. there have been further developments that i will come back to later in my presentation. why is it impossible to implement the amendment? what difficulties arise? the amendment requires bringing together a variety of requirements in the banking act and other laws on deposits and withdrawals. requirements set by banks for their customers, their terms and conditions, would also need to be wrapped in ( including atm limits, hours for accessing the bank ). pocamla also has requirements on cash transactions, and these will conflict with the amendment. similarly by treaty, kenya is subject to the resolutions of the un security council, including on aspects of cash transactions. the amendment would conflict with that. the amendment does not ensure the safety and soundness of bank transactions. in addition, it does not allow the needed flexibility even in cases of “ clear and present ” danger. can i describe kenya ’ s aml / cft framework? yes, i will, but we must first acknowledge that kenya remains vulnerable to risks from money laundering and the financing of terrorism, by virtue of its location, advanced financial sector, cash - based economy, and instances of the underlying crimes. to set the stage, i will first describe the tenets of an effective aml / cft framework. the framework is intended to protect the financial sector from abuse. an effective framework strengthens the sector ’ s integrity, and that illicit funds do not flow through the financial sector. the tenets of effective aml / cft include : kyc / customer due diligence measures ; monitoring of transactions ; report of