risk that institutions using such models might understate their exposures – and thus their capital adequacy requirements – but without questioning the principle of the risk - based approach as such. much of the work needed to address this topic was wrapped up in 2016. the main outstanding issue is the calibration of what is known as the “ output floor ” – that is, the lower threshold for capital adequacy requirements calculated with the aid of internal models. the bundesbank has been involved in efforts to hammer out a compromise up until recently. but as long as the new us negotiators have not been appointed and their negotiating stance remains unclear, there is no point in conducting any further talks. and yet we all have an interest in returning to the negotiating table soon. after all, the regulatory uncertainty caused by a delay in finalising basel iii is undoubtedly a burden for banks. i firmly believe that the coordinated international revision of banking regulations in recent years have made the financial system a more stable place. that is why a regulatory “ race to the bottom ” would be a dangerous thing. the debate surrounding this topic often points to the seemingly positive impact that deregulation can have on growth. the untold damage that inadequately regulated banks and financial markets can do to growth when they precipitate a financial crisis is something we witnessed at close hand – closer than we might have liked – in recent years, if we didn ’ t know it already. ladies and gentlemen as far as free trade and banking regulation are concerned, it is still unclear at the moment what exactly the future holds in store for international cooperation. the status quo is under the spotlight in other policy areas, too – the topic of international security springs to mind. and europe, in particular, faces the twin challenge of not only dealing with brexit but also handling the sense of disenchantment with the eu in many member states. this is the background against which some voices are now calling for the euro - area countries to close ranks. a strong and united europe is a goal worth striving for. but i don ’ t buy proposals like the ones floated recently that essentially boil down to closing ranks primarily through an increase in mutual liability. there are two ways to put monetary union on a more stable footing for good. one is to establish a fiscal union – but there does not appear to be any great appetite to cede the necessary sovereign rights to the european level at the present time, and

peter pang : economic and financial outlook for the asia / pacific region welcome remarks by mr peter pang, deputy chief executive of the hong kong monetary authority, at the launch of the international monetary fund ’ s regional economic outlook, hong kong, 28 april 2014. * * * 1. good afternoon. it is my pleasure to welcome all of you to the launch of the latest issue of the imf ’ s asia and pacific regional economic outlook. we are honoured to have mr. changyong rhee, director of the asia and pacific department of the imf, and his colleagues to share with us today their views on the region ’ s economic and financial developments, the outlook and the challenges, and what can be done to manage the risks and promote further growth that is sustainable over the years ahead. 2. i totally agree with the theme of this issue of the reo – sustaining asia ’ s high growth momentum would require continuing vigilance and reforms. there is little doubt that asia will continue to grow faster than most other regions in the world. since the asian financial crisis, policymakers have implemented many structural reforms making the region more resilient. asia has also been leading the world recovery after the global financial crisis. having said that, asia cannot afford to feel complacent as the road ahead is bumpy. and we will be in unchartered waters when the high tide of global liquidity starts to ebb as the developed economies embark on the normalization of their monetary policies. we should get well prepared or would lose the momentum quickly. 3. exit by the u. s. fed from its unconventional monetary policies is one of the most important external challenges that the region will face in the next year or two. a timely and orderly normalisation of monetary policy in the us should help to slow credit growth and contain asset price inflation in the region. however, a disorderly normalisation process could lead to significant outflows of capital, abrupt tightening of financial conditions and a severe re - pricing of assets. this can result in financial instability and even a sharp slowdown of economic growth in the region, particularly in those economies with weaker fundamentals and higher reliance on external financing. yet, there is a lively debate about the size of the labour market slack in the us, which could complicate the judgment about inflation risks and the conduct of monetary policy. indeed, the path of exit is not necessarily smooth, and interest rate volatility could be higher than