to mind the debate between the efficient market hypothesis proponents and the advocates of behavioral finance. to believers of efficient markets, the price contains all relevant information to make a decision and market forces will trade away arbitrage opportunities. believers of behavioral finance, on the other hand, look at a trader ’ s psychology and how he values “ prospects ” and “ gambles ” as the drivers of prices. to its supporters, behavioral finance explains market overshooting, over / under - reaction and loss aversion. well, the jury is still in out on this debate … but whether you believe in one school of thought or the other, one thing is clear – to be able to maximize your treasury potential, you need information … correct and timely information. i hope that by having distilled our current market environment into three risks, four lessons and three policy guideposts, i have moved this discussion further to help you optimize your potential. as i close, let me point out that your chosen theme is not limited to parochial bottom - line optimization. your theme calls for “ excellence ”. to me, that is a call for you to be responsible stakeholders. if you are on the sell - side, sufficient disclosure and transparency are central in your dealings. if you are on the buy - side, bounded risk taking is relevant in your investments. as you perform your jobs, i hope you appreciate that you are an invaluable partner of the bsp in transmitting the impact of our policies to the real economy …. i hope also that you bear in mind that as participants in the financial market, you have a responsibility to the broader community that you are in … finally, i trust that you will remember that your reason for being is to finance activities in the real sector. on that note, let me once again thank the organizers of this conference and wish all of you a productive and rewarding afternoon. good day to all! bis central bankers ’ speeches

. 30 am, there would already have been discussions of the macro trends that can be expected — strong economic growth, manageable inflation, robust external position, sound banking system …. so i shall no longer repeat those. instead, i shall deal directly with the risks in our operating environment that fall from those trends. the first risk … global headwinds will continue to be formidable. despite collective efforts to address systemic weaknesses, europe continues to struggle with economic and socio - political obstacles to the implementation of much - needed rehabilitation and reform measures … the economic outlook in the us is also uncertain, as unemployment remains elevated and private sector demand continues to be weak … and the so - called “ fiscal cliff ” continues to limit the room for fiscal stimulus. even for asia, less - than - favorable indicators in major emerging asian economies as of late – in particular, slowing growth in china and india – suggest a vulnerability to the global slowdown, as weak external demand from advanced economies exerts its impact across the region. as a result, the imf, in its world economic outlook update in july, cut its global economic growth projections for both 2012 and 2013 to 3. 5 pct and 3. 9 pct, respectively. bis central bankers ’ speeches for the philippines, however, it is of some comfort that the economy has been resilient against the global downturn. growth continues to be driven by a vibrant services sector, robust private demand, and accelerating government consumption … the q2 gdp is expected to be released at the end of the month ( 30 august ). let us therefore see if the second - fastest growing economy in asia would continue to beat market expectations. second risk … europe ’ s apparent deleveraging – or the shrinkage of assets in light of the current stream of global regulatory reform – may result in squeezes in the rest of the world, particularly asia. for instance, in response to basel 3, some international banks, instead of raising more capital, have resorted to reducing their risk - weighted assets as a way of increasing their capital adequacy ratio or car. in the car build - up recently required by the european banking authority ( eba ) on 71 banks, this form of deleveraging seems to be recurring. it is thus no surprise that some quarters estimate that complying with basel 3 alone will reduce bank profitability and / or impair gdp. the 2011 study of the oecd led to a result that basel 3 implementation would