of foreign currency cash flow mismatches over different time horizons. corporate governance will remain an important priority of the regulatory framework in preserving a sound financial system. the progressive adoption of more principle - based regulations has placed greater reliance on the effective oversight by boards and the senior management to ensure that the regulatory flexibilities accorded to financial institutions are exercised in a judicious manner. a revised fit and proper standard for directors, senior management and controllers of financial institutions will be issued, complemented by an improved and coordinated strategy for the education of directors of financial institutions to strengthen their oversight responsibilities in a more complex financial landscape. the recent crisis also brought to light the critical importance of coordinated and prompt response by regulators in dealing with crises, whether through market interventions or in the resolution of banking institutions that are experiencing difficulty. coordinated actions by the central banks in europe and the united states have relieved the liquidity tensions in the financial markets. however, national arrangements for dealing with problem banking institutions are being severely tested. decisive action is vital to ensure the continued intermediation process to stem the spread of the financial crisis within the financial system and to the real sector. such early action will also reduce the cost of the crisis. for malaysia the cost of the crisis ten years ago was less than 5 % of gdp. danamodal in fact recorded a pre - tax profit of rm200 million upon full repayment from the recapitalised institutions. more recently, additional initiatives have been taken to strengthen the safety net, interagency coordination arrangements and the legal framework for interventions. today, we have a holistic financial safety net framework in malaysia which includes a lender of last resort framework and a comprehensive deposit insurance system. the regulatory and supervisory framework is also supported by enhanced intervention framework for dealing with banks under financial stress. the enhanced supervisory intervention powers is to be embodied in the amendments to the various legislations administered by the central bank. the provision of liquidity support by bank negara malaysia for financial institutions in distress is a key component of the safety net. in light of recent international experiences of bank failures, the traditional intervention criterion of lending to “ solvent but illiquid ” banks has been put to the test as it becomes increasingly difficult to determine the necessity for intervention as well as the method and timing of such measures. the extension of such support will therefore be based on a careful balance of various considerations, which include amongst others, its potential systemic implications, the cost of the intervention, the cost of

supervision moving forward. first, to strengthen financial sector legislation through the modernisation and consolidation of existing regulatory / oversight laws under bank negara malaysia ’ s purview. the enhanced legislation ensures that bank negara malaysia is entrusted with the necessary mandate and power to maintain financial stability and to conduct effective supervision of financial institutions. second, complement existing micro - prudential rules with macro - prudential instruments to address system - wide risks with the aim of ensuring greater resilience of individual institutions, and the financial system as a whole. third, enhance comprehensive cross - border crisis management and financial stability surveillance arrangements. this can be done via channels such as the emeap monetary and financial stability financial committee, which was established in 2007 to enhance regional collaboration and cooperation in the area of macromonitoring and crisis management. efforts are also directed to strengthen financial safety nets within the region ( e. g. cross - border collateral arrangements, currency swap arrangements ). we are quite confident these arrangements will further strengthen the resilience of regional financial systems and economies. these measures will become increasingly important in the light of our effort to increase the integration of financial systems within the region. fourth, establish a holistic framework for consolidated supervision. all the activities of financial conglomerates are within appropriate risk levels and not overly complex, and the large groups are not a source and channels for amplifying contagion effects. supervisory cooperation initiatives at the regional level will also be directed at enhancing existing or introducing additional platforms ( e. g. creation of supervisory colleges ) for discussing issues related to the supervision and resolution of cross - border financial institutions. fifth, promote fair and transparent market conduct practices by financial institutions through heightened market conduct surveillance and transparency requirements, while also raising the level of financial capability of consumers through education and awareness programmes. how malaysia survived the global financial crisis let me conclude by outlining why we had not been adversely affected by the recent financial crisis. banking system maintained strong financial and capital buffers at end 2008 during the peak of the crisis as evidenced by : strong capital position with rwcr of 12. 6 % and core capital ratio of 10. 6 %. ample liquidity with total interbank placements of more than rm150 billion with bnm that can be unwound to release rm liquidity to the system at any time. low exposures to foreign currency ( fx ) denominated assets. banks ’ leverage position remains manageable and lower than foreign institutions abroad.