qualified team of inspectors. there are no specific international standards on this matter. all the principles and recommendations mention supervision as the core component of prevention, but we are still in need of a standardized methodology. the third pillar is rating. we believe that specific rating mechanisms developed by local supervisors should be implemented, on the basis of an agreement on aspects such as components to be rated, and the rating systems applicable to financial institutions. although traditionally we have rated financial institutions mainly according to liquidity and solvency considerations in order to protect the stability of financial systems, we consider that rating banks on the basis of compliance with aml / cft regulations will be relevant. the last pillar concerns information sharing. guidelines for the use of information and to which extend it may be shared should be defined. all of this, with special emphasis on the analysis of the legal frameworks of the different jurisdictions. standards with these features would allow to enhance awareness of financial systems on aml / cft matters, providing them with a credible and stable framework for conducting their businesses and, in addition, for developing a valuable flow of information that can be exchanged between private sector parties and between the private and the public sector. this supervision methodology, in the process of being implemented in argentina, includes technical assistance from international institutions such as the world bank. our vision is fully consistent with the risk - based approach that allows financial institutions to focus their resources on those operations, transactions, customers and accounts that show greatest vulnerability to global crimes. these approaches - already adopted by countries such as the united states - are included in several of the regulatory aspects proposed by the us patriot act, and are in line with the spirit of many of the recommendations of the fatf. the risk - based approach recognizes that the banking business has peculiarities linked to cultural and historical matters associated with each region. therefore, any regulatory framework must be flexible enough to be able to ensure certain discretion to member countries, being applied on the grounds of their knowledge of their own banking and financial practices. there is no unique solution or pre - established methodology for governments or international institutions to define the nature and content of a risk - based approach. nevertheless, certain principles have been developed, describing basic concepts, which serve as a guide to develop and implement a system that can operate reasonably. however, specific aspects must be developed by the institutions on the basis of the particularities of each case. standards that, for example, break down risk into three vectors - country risk, customer risk and service

establish institutions specifically to cater to the requirements of financial resources for long term developmental efforts. bis central bankers ’ speeches international experience 10. having seen the context in which the dfis were set up, let me now give you some global perspective on the dfis. two distinct models of development financing have been followed internationally. at one end of the spectrum is the anglo - american model, which is purely market based with financial markets playing an important role in allocating resources for competing uses, including the industry and long term projects. at the other end is the model adopted by continental europe and south east asian economies, in which financial savings were channelized and allocated through financial intermediaries like banks and dfis. the dfis played a very significant role in the rapid reconstruction and industrialization of germany and japan after the 2nd world war by providing long - term credit. in japan, the government owned japan development bank was established in 1951 for reconstruction of the economy. in korea and singapore also dfis were set up in 1960s with the main aim of rapid industrial development. the emergence of dfis in the then developing economies also coincided with a period when the capital market, as a source of long term funding, was yet to stabilize. based on the european model, the success of the dfis in the overseas territories provided strong impetus for creation of dfis in india after independence. 11. the initial mission for which the dfis were set up in the developed economies were complete by the 1980s and most of them have since been wound down or their roles have been redefined. most of the surviving dfis now operate in niche segments of financial market where the entry barriers are relatively very stringent. india has also witnessed several structural changes in the banking and financial system, especially in the post reform period which has undermined the objectives for which the dfis were established. commercial banks, which traditionally refrained from lending for the long term or infrastructure projects gradually improved their project appraisal skills, their risk management capabilities and slowly developed appetite for long term lending. the stable retail deposit base built by the banks also aided their asset - liability management function. further, the development of the bond markets also enabled commercial banks to raise long term funds from the insurance and pension funds. these structural changes in the economy meant that the dfis lost their competitive edge in the long term finance market and started facing challenges on solvency and liquidity fronts. the non - performing