traditional asset classes like the government treasury bills to more sophisticated asset classes. with this development, we now witness changes in the asset portfolios of central banks in the current context, since central banks have moved into more dynamic instruments to achieve its return objective within certain acceptable risk parameters. consequently, gold and treasury bill holdings traditionally held by central banks are now being challenged by investments like derivative products, securities lending and securitised products, and this trend opens out a new canvas for the reserve managers of central banks. 3. the experience of the financial market turmoil has led to fresh new challenges as well, which are quite formidable. at one time, mortgage backed and asset backed securities of government owned or government sponsored agencies, were considered good alternatives for the generation of added spreads for central banks. however, today, the market fluctuations and credit concerns arising from the mortgage and housing market crises due to overall market downturns and increased mortgage defaults in developed countries, has exposed new vulnerabilities and risks attached to such investment avenues. as a result, the vital importance of managing risks associated with reserve management have been increasing exponentially in recent times. 4. that development will lead us to another important aspect in this discussion. in the past, measuring risk was mostly based on credit ratings. for this purpose, the yardstick for measurement was usually provided by the rating agencies who were supposed to rate countries and institutions in accordance with certain predetermined norms. however, it is now clear that the rating agencies on whom we relied heavily to provide us with independent assessments of the standing of institutions and instruments, have obviously failed to warn of possible weaknesses in the balance sheets of such institutions and investment houses. in fact, perhaps unwittingly, they may have even contributed to the turmoil, by their ratings of pooled assets with large vulnerabilities, as assets of prime class. this may have been due to the weaknesses in their approaches, the lack of proper skills or the weaknesses of their governance frameworks. but, whatever may be the reasons behind these failures, the challenge that we now face is as to how to manage risks optimally in this even more challenging environment, knowing that the opinions provided by the rating agencies may not be too accurate, after all. 5. let me now highlight another couple of recent developments. one such development is the greater significance of the sovereign wealth funds in the context of the phenomenal rise in reserves in non - western countries. in the midst of the recent

sub prime crisis, these funds have injected significant amounts of long term funds to the large ailing institutions to resurrect them or to prevent them from continuing with poor financial health. in that sense, the sovereign funds have acted as an immensely useful stabilizing force during the financial crisis. however, the injection of such funds has been received with mixed feelings in the geo - political context. i would think the debate on this development is just beginning and it would be useful for all of us to carefully watch the movement of this issue in time to come. another important development in reserve management is the extensive use of external fund managers. external fund managers are being increasingly engaged by central banks, as many central banks are yet to acquire the technical skills and competencies required to manage the new asset classes that are developing in these dynamic market conditions. i would think this factor too, would be one that we would have to give a lot of attention in the future, and as to how we make use of such expertise without compromising central banks ’ core objectives, would be a challenge for all of us. 6. my dear friends, given the importance of reserve management, it is timely to organize a seminar on this subject. when reading through your program, i realized that the organizers and the resource persons have done remarkably well in selecting the topics to be covered. in my view, the topics and presentations are just the right blend that a reserve manager would wish to focus on, in this day and age. finally, let me take this opportunity to sincerely thank the resource persons who have accepted our invitation to share their knowledge and experiences on various subjects relating to reserve management, the central banks of our member countries for showing high interest in this program, our own cbs for organizing this event, and i wish that all of us could benefit significantly from the program. i wish this seminar all success.