very flexible and inexpensive short - term financing offered by triparty repos to be extremely attractive. to the extent that this borrowing appeared riskless to lenders, broker - dealers were potential suppliers through triparty repos of the safe, liquid assets that were in such demand. broker - dealers who borrow in the triparty repo market want to have access to their securities for routine trading purposes – for example, to make deliveries to clients during the day. to allow for that, the market developed a critical operational feature called the “ daily unwind ”. each day, the clearing banks “ unwind ” all repo trades, returning securities to borrowers and cash to lenders, even for longer - dated term transactions. however, the securities still require financing during the day. to this end, borrowers rely on intraday overdrafts at the two major clearing banks. at the end of the day, the transactions are “ re - wound ”. thus, the risks associated with the portfolios of securities are fully transferred twice each day. the lenders in this market widely believed that the two clearing banks would always unwind their maturing trades in the morning, returning cash to their account, despite no contractual provision requiring that the clearing banks do so. the fact that lenders believed they were protected in this way by the clearing bank helped perpetuate the illusion that, particularly when lending overnight, they were invested in a money - like asset that would always be highly liquid and safe, even though in reality the borrower was usually an entity that could go bankrupt. this illusion faded as the financial crisis progressed. significant strains were created by concerns about the financial strength of the broker - dealers, uncertainty about the value of the underlying collateral, and belated recognition that the clearing banks were not contractually obligated to unwind maturing trades. only when the prospect of dealer failures became very real – for example, in the case of countrywide ’ s broker - dealer affiliate in august 2007 and bear stearns in march 2008 – did the lenders appear to see these risks clearly. in addition, the presumed stabilizing function of collateral was weakened, since a default by a dealer or clearing bank could leave lenders with securities posted as collateral that they had no desire, operational capacity, or even, in some cases, legal authority to hold, or at least liquidate in an orderly way. the response at that point was to flee, ignoring the protection putatively afforded

’ s overall financial performance. this would allow for more - informed decision - making, thus contributing towards greater competitive advantage. moving forward, there will be increased expectation for more efficient use of internal resources. a more enhanced and integrated risk management framework, and the adoption of a risk adjusted performance management model would serve to further facilitate shareholders ’ activism and drive greater efficiency among banks. risk management however does not operate in a vacuum or in isolation and it should not be viewed merely for the purpose of regulatory compliance. priority should be given to ensure that the risk management framework is well - aligned and well - integrated with the strategic business directions of the banking institution. the benefits of refined risk quantification and more robust risk management should be translated into improvements in business operations and more effective functioning of the institutions. this will in turn ultimately bring benefits to the consumers and the economy at large. implementation challenges and considerations ladies and gentlemen, given the complexity of basel ii, the ability to comply appears to be the main concern within the banking community. this is truly a major undertaking with respect to the irb approaches or the internal rating based systems. the resources involved and data constraints are often cited as the two main challenges in implementing the irb approach, particularly for banks in the emerging markets. at this stage, data on default and credit migration for certain market segments is too limited to facilitate any meaningful analysis. it is therefore recognized that some lead time would be needed for banking institutions to produce a robust and meaningful validation of internal estimates of probabilities of default and loss given default. however, this does not mean that banks should wait until all the requisite data is in place. banks can initiate work to establish the framework for analytical functions. while the industry survey conducted by bank negara malaysia revealed a strong preference among malaysian banking institutions to adopt the irb approach, many had indicated the need to further strengthen their business case and undertake more comprehensive gap and impact analysis. this is indeed a critical process. of importance is to be able to extract the benefits out of the new accord. this would however, take time even for large and internationally active banking institutions that have made substantial enhancements over the years. standardised approach offers benefits with much less complexity while capital savings from the adoption of the standardized approach may be relatively lower than the irb approach, the benefits to be gained under the standardized approach are still considerable compared to the current accord. it includes the lower risk weights to be assigned to the mortgage portfolio, which would be reduced