mf providers, enabling microcredit access to around 350, 000 new micro borrowers. • the facility, due to its risk sharing structure has achieved a leverage of 3 times, mobilizing an additional rs. 5 billion from private capital markets, establishing that microfinance may not be that risky as a business proposition, and • most of all, the facility has engaged 16 commercial banks and recently retail investors in funding the microfinance providers. in doing so, the facility has accomplished the following key long - term development objectives : first, the guarantee has helped build links between micro borrowers and banks / dfis. the familiarization of the banks / dfis with the client will eventually lead to mainstreaming and graduation of the micro borrower ; second, the facility has introduced microfinance business to banks / dfis as banks have to evaluate the microfinance providers which must have helped them develop their own sense of the risks involved in microfinance. as a result, banks are now more willing to invest in micro banking ; and finally, and more importantly, the facility has helped microfinance providers to offer small ticket sizes for retail investors. this has offered small retail investors an alternate channel for investing their savings and earning relatively higher returns, encouraging the concept of micro - savings. i would like to conclude by saying that the mcgf has attained most of its developmental objectives. moreover, i firmly believe that this tfc issuance will go a long way in diversifying funding for the microfinance sector. i strongly encourage all the financial market players to develop a long term vision for making the financial sector in pakistan more inclusive. thank you! bis central bankers ’ speeches

which i will cover three main areas. first, i will begin by offering my view on operational risk management – the issues and challenges. next, i will discuss basel accord treatment of operational risk and emergence of sound principles on the topic. finally, i will talk about some of the regulatory developments & supervisory expectations to strengthen the operational risk management within our banking sector. operational risk has always existed as one of the core risks in banking. but what constituted operational risk was never agreed until the basel committee on banking supervision ( bcbs ) came up with a definition. for this reason, basel accord may rightly be credited for promoting bis central bankers ’ speeches the discipline of operational risk which recognized it as a significant risk and prescribed capital charge to protect against operational risk losses. the bcbs defined operational risk as – “ the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events ”. while the definition has determined four sources of operational risk ( i. e. people, processes, systems and external events ), there are a number of ways in which operational risk can actually manifest itself. it could be a failure of control function, major system breakdown, rogue trading, accounting scam, regulatory penalties, internal / external fraud, diminishing number of qualified staff, terrorist attack, floods, earth quakes etc. since the scope of operational risk encompasses the entire organization and covers several dimensions. we, as banking professionals, need to consider the following points in defining any strategy to manage and mitigate operational risk. • the source of operational risk is from the day to day activities of a bank. for this reason, operational risk management must initiate from the business unit level. • there is misconception that operational risk management is solely about internal controls. banks are good in minimizing high frequency low severity risk events but it is often low frequency high severity events that can jeopardize the existence of a bank. hence we need to identify and analyze predictive key risk indicators and use scenario analysis to simulate the impact of irregular events. • good operational risk management is about finding and correcting the real cause of the incidents and not about the effects or observed events. thus, while maintaining the history of losses is important for capital modeling, we need to realize that two identical events may have entirely different underlying causes. as a result, every operational risk event requires deeper investigation. • operational risk management is all about instilling proper risk behaviors. thus changes in culture and governance