government finance ministries for making advanced preparations for managing the financial crises. in the backdrop of the recent global financial crises, the remuneration of directors and executives of banks and financial institutions have lately come under scrutiny around the globe. in order to put things in the right direction, there has been a growing effort globally to address the issues related to rationalization of compensation in the financial sector. institutions like bis, fsb and many national regulators like fsa, apra and hkma, among others, have made purposeful attempts to bring the issue of excessive remunerations to the forefront and make it more transparent and fair, not only by making enhanced disclosure requirements, but also drawing a detailed structure of requirements and guidelines for determining the remuneration and compensation of executives. fsb issued “ principles for sound compensation practices ” in april 2009 and relevant “ implementation standards ” in september 2009. both these documents were later adopted in a consolidated form by the basel committee on banking supervision in january 2010. pakistan is a small, open economy, with domestically an active financial sector with limited interconnectedness with advanced economies. like many other developing countries, it did not face the direct impact of the crisis on its banking system and financial markets. in terms of banking concentration, top 5 banks ( all locally incorporated ) account for 51 % of industry bis central bankers ’ speeches assets ; while foreign assets of the system are 10. 4 % of total assets. moreover locallyincorporated banks and most foreign branches don ’ t have significant exposures to the complex financial assets that caused the financial meltdown in the u. s. and europe. sbp has always required banks to meet higher capital and liquidity standards, exceeding international norms in several areas. more importantly, we have a strong legal framework, which has been tested for effectiveness during the last decade and half. sbp has successfully restructured a number of banks, successfully demonstrating the problem bank resolution regime. sbp being the regulator of the banking sector, has introduced and implemented key regulatory reforms and prudential measures to ensure financial system stability. further, in order to align its regulatory framework with international regulatory standards and best practices, it regularly reviews and evaluates the standards issued by them for their possible implementation keeping in view our own local legal, regulatory and economic environment. similarly, sbp has taken steps to improve the effectiveness of macroprudential supervision by revising its prudential regulations like rationalization of loan classification and loan loss provisioning requirements

yaseen anwar : international regulatory initiatives to enhance global financial stability speech by mr yaseen anwar, governor of the state bank of pakistan, at the 9th islamic financial services board ( ifsb ) summit, hosted by the central bank of the republic of turkey, istanbul, 16 may 2012. * * * mr. chairman, the secretary general ifsb, distinguished guests, ladies and gentlemen! it is a pleasure and an honor to join you at this 9th ifsb summit. i am greatful to ifsb for inviting me to share my views on “ international regulatory initiatives to enhance global financial stability ” with this esteemed audience. in my remarks today i will briefly discuss the events that lead to recent reforms, importance of regulatory initiative introduced so far and pakistan ’ s standing. the crises that hit the global financial landscape during 2007 remains the worst since the great depression of 1930s. though originating from financial markets and innovative “ opaque ” financial products, it impacted virtually every aspect of the world economy with consequences affecting the masses. the instruments that were meant to disperse financial risks instead allowed financial institutions in general and the banking system in particular to become highly leveraged that ultimately lead to financial meltdown. as a result, it not only put the innovations in the financial markets under the spotlight, but also singled - out regulatory and supervisory weaknesses in assessing the risks associated with financial institutions, markets and innovative financial products. the euro region still faces the effects of the financial turbulence in the form of sovereign debt crisis. the fragile gdp growth and the unemployment data in the uk, usa and other crisis hit advanced economies still falls short of the pre - crisis level. on a positive note, the financial crisis provided valuable lessons for improving the effectiveness of financial system regulation and supervision. to policymakers, it reminded that the present state of the international financial system requires a complete overhaul of the functioning of the markets and institutions. from supervisory perspectives, it showed that the available prudential regulations are simply not effective and prudent enough to ensure financial system stability. the lessons learnt from the financial crisis signify the far - reaching changes in the structure and functioning of the financial systems and institutions. the international regulatory bodies including financial stability board ( fsb ), imf and bis along with national supervisory bodies have developed a set of regulatory and supervisory reforms that aim at increasing the effectiveness of financial sector supervision. furthermore, the g - 20 leaders at various summits have endorsed the policy framework recommended by fsb and bcbs, which has