out by the government. some argued that those behaviors were closely related, or as consequences of the low interest rate policy, particularly in early 2000s, as well as the relatively loose financial institution regulation and supervision by authorities in major countries. now, we are also again witnessing low interest rate environment in major countries, as one of the main parts of the crisis policy respond. however, there is now an increasing discussion on how to enhance the effectiveness of the financial regulation and supervision, to prevent, that what happened in the past will not be repeated. in addition, there is also an increasing attention, put in the risk taking behaviors of financial market players, such as we find in the leaders ’ statement of the g20 summit in pittsburgh last september. this risk taking behavior is believed, affecting monetary policy transmission through their significant distortion in financial stability. hence, in turn it reduces the effectiveness of monetary policy. this issue, known as risk taking channel, is also relevant to today ’ s discussion, but i will not discuss further this aspect in my speech this morning. with the above background, i would like to emphasize my speech on the liquidity aspect of the banking and money market, as well as in the financial market. this liquidity aspect, along with the availability of related “ infrastructure ” is a crucial foundation, to ensure the soundness of financial institutions and to develop healthy financial market. the indonesian banking, money market and financial market in contrast to those observed in major financial market, the indonesian financial market can be considered as still in an early stage of its development, despite significant progresses achieved in the last couple of years. also, from the type of transaction and instrument variety, as well as from their funding type of financial institution, the indonesian financial market could be viewed as too traditional or too conventional. yet, these facts became such a “ blessing in disguise ” and help sheltered the domestic financial market and the economy from the adverse impact of the recent global crisis. before i elaborate on the aspects that need to be improved in our domestic financial market, i would like to briefly discuss the characteristics of the indonesian banking, money market and financial market as a background. banking the indonesia ’ s banking industry is actually operating in a new stage in post 1997 / 98 crisis and 1999 banks recapitalization era, as compared to the previous period. there are two factors that characterized the current indonesian banking sector in general. first, they are operating in structural excess liquidity in the inter - bank money market. in

’ balance sheet, which mostly originated from banks ’ recapitalization in 1999. recently, banks hold around 50 % of outstanding sun of rp. 570 trillion. this type of asset is risk free hence no bad debt provision is needed. it helps banks in maintaining a strong capital, but with result a lower yield compare to other earning assets. however, on the other side, this result in banks being more expose into market risk, as has been showed when the sun prices ( idma index ) dropped to their lowest level of 67. 11 in 29 october 2008. under excess liquidity condition, banks ’ attention on the liquidness of this type of assets is relatively low. in this regards, i refer liquidity as an easiness of sun to be traded, or exchange into cash without significantly impact their price. banks tend to practically borrow in unsecured money market, rather than undertake repo transaction to serve their short - term liquidity need. this could be seen, that despite bank indonesia has actually facilitated market participants to establish a standard repo agreement ( mra ) since june 2005 as one infrastructure to increase the liquidity of sun market, but in reality their respond is quite marginal. money market and financial market the indonesian money market is basically inter - bank money market, as it mostly involves only banking. so far, the transaction in the inter - bank money market is dominated by unsecured lending / borrowing ( puab ), and mostly in a very short term maturity. around 60 % of inter - bank transaction is overnight. there may be some short - term debt instrument in otc ( over the counter market ), but i believe in a very small numbers and not actively traded amongst bank. there is also perhaps, an interest rate swap ( irs ) or overnight index swap ( ois ) in otc market, as there is sometime a quotation in bloomberg or reuters. but, it seems not quite regular and the transaction is supposed to be in a very small number. thus, in general, money market is not yet considered to better serve banks ’ portfolio management. meanwhile, in the foreign exchange market, the transaction is also still dominated by spot transaction. the daily volume of inter - bank spot transaction is about 1. 5 – 2 billion us dollar in the last two years. in addition, swap transaction is around 300 million us dollar in 2009, a bit lower compare to around 500 million us dollar last year. further, the financial market is dominated