, membership of a monetary union and the absence of an independent monetary and exchange rate policy means that member state ’ s domestic economic policies have to be appropriate. in particular, as i have mentioned earlier, in the absence of an independent monetary policy, it is essential in present circumstances that a strong focus is placed on policies to restore competitiveness. contributing to financial stability while monetary policy and liquidity provision have always been the key functions of central banks, in recent years there has been an increasing emphasis on their contribution to financial stability. through the publication of financial stability assessments, central banks in the major industrial countries draw attention to risks to the financial system. this information and analysis is provided to the wider public, financial market participants and directly to the banks so that they are informed about the economic and financial environment, thus allowing them to adjust their behaviour consistent with those risks. it is precisely this role that the central bank here has played over the past four to five years pointing out the domestic and international risks to the economy at a time when house prices and credit growth were increasing at very high rates. these risks, based on our ongoing analysis and research, were highlighted not only in our annual financial stability reports, but also in our quarterly bulletins and in statements made by me regularly. in the context of an unprecedented period of expansion and wealth creation, this proved a difficult message to get across. it is evident there was not a sufficient or timely change in behaviour in response to these warnings. other central banks around the world faced similar headwinds in changing behaviour consistent with the risks identified in their own financial stability assessments. an international debate has now begun on how authorities might directly change the behaviour of financial market participants to mitigate the risks identified in financial stability reports. this debate, in part, is focusing on whether central banks need specific powers to intervene directly in this regard. for example, one proposal is that central banks might have an explicit role in setting capital ratios in response to emerging risks identified in their financial stability assessments. a further area for discussion is how monetary policy might better respond to asset price developments. for example, should policy “ lean against the wind ” by tackling asset price inflation more directly. recent developments in late - september, following the lehman ’ s bankruptcy and when the global interbank markets froze and funding was unavailable even at the shortest maturities, the central bank formed the view that the risks to financial stability were becoming unacceptably high with knock - on effects for the wider economy.

the global economy, volatile commodity prices, and the continuing financial turmoil, conventional wisdom says that it will be. nevertheless, i believe that together we have the capacity to ride out the challenges before us. the key is to manage the factors that are within our control, to maintain a positive mindset, and to capitalize on our time - tested resiliency and ability to innovate amidst challenging times. and don ’ t forget, our economic fundamentals continue to be a source for optimism. this includes sustained economic growth, slowing inflation, declining interest rates, record high international reserves, balance of payments surplus, a competitive peso and a stable banking system. in the end, the challenge in 2009 for the banking sector is to quickly act on the painful lessons of the global financial crisis. it is simply far too convenient to point at the complexities of structured products, the over - leveraging, or the fundamental dilemma with market greed. all these were necessary inputs but together they are not sufficient to explain where the world is today. more importantly, debating the whys and wherefores will have its place, but at this juncture we need to act decisively with conviction, in unison, and move forward. ladies and gentlemen, while the global prognosis for 2009 is daunting, the bangko sentral continues to believe that the philippines remains in a position of relative strength as we navigate through these difficult times. what we do to consolidate our gains rests squarely on us. in the case of the philippine banking community, i am confident it will prevail and remain sound and stable. on behalf of the members of the monetary board, i thank all the sectors represented here tonight for their continuing support : the banking community ; the legislative, executive and judicial branches of government ; the private sector, the diplomatic corps, the academe, the media, our special guests, and our partners in bilateral and multilateral agencies. together, let us offer a toast to our continuing partnership in sustaining economic growth in our country and improving the quality of life of filipinos. cheers! finally, before it becomes totally unfashionable, let me take this opportunity to wish all of you blessings of good health, success, and prosperity this new year. mabuhay! thank you all and enjoy the rest of the evening.