to support the growth process by optimally providing services to the public according to its own market share. with the adjustment in focus and business strategy of the government banks, i expect each government - owned to compete with other banks according to their vision and mission as well as their competitive strengths. for bank indonesia, this policy measure will generate significant results in terms of reinforcing the bank consolidation program, while also serving as an integral part of national bank restructuring as a whole. b. expanding operational opportunities concerning universal banking for suitable banks ladies and gentlemen, recently, bank indonesia presented a plan to the public regarding the possibility of adopting universal banking to substitute our current commercial banking approach. we have adjusted legislation to serve as a legal foundation for our banks. action to adopt this universal system is basically a response to our position amidst financial sector globalization that is becoming more real in our daily lives. in practice, to improve the banks ’ function and role in mobilizing public funds, current global bank development direction is innovative. this enables the integrated packaging of a bank ’ s products with other financial industry products. in terms of the banking industry, this is undertaken to achieve several objectives simultaneously, more specifically to hasten fund flows managed by banks, as well as expand the operational base to be capable of increasing the income margin and reducing risk exposure. from a public policy management standpoint, the adoption of universal banking into the indonesian banking system will also support financial market deepening, which will eventually contribute to financial stability and economic growth. broader bank product variety may also be instrumental in maintaining financial stability as it provides investment diversification for the public. without concentrating placements in only one or several types of product, it is expected that the economy will become more resilient when confronting shocks. in this case, a deeper financial market is often identified as a more resilient and stable financial market. financial intermediation that is required to drive an economy will also be assisted by the growing number of available financial products. integration of bank activities and products in the form of asset securitization, mutual funds, and derivative transactions will obviously increase risk exposure, not only for the institutions involved, but also the financial system as a whole. consequently, we will have to be prepared to meet the various supporting conditions to continuously maintain stability. banks involved in universal banking are required to have capable human resources, solid financial and operational power, as well as the ability to manage risk effectively before commencing such activity. in fact, it is

daniel k tarullo : monetary policy and financial stability speech by mr daniel k tarullo, member of the board of governors of the federal reserve system, at the 30th annual national association for business economics economic policy conference, arlington, virginia, 25 february 2014. * * * the financial crisis and its aftermath prompted an almost immediate call for change in financial regulation. beyond the basic reaction that prudential regulation needed to be stronger and less subject to arbitrage, considerable support grew for the formerly minority view that regulation also needed to be firmly grounded in a macroprudential perspective explicitly directed at the stability of the financial system as a whole, not just at each regulated firm individually. the crisis also prompted increased attention to the relationship between monetary policy and financial stability. here the lines of debate seem more sharply drawn than in the area of financial regulation. while few today would take the pre - crisis view common among central bankers that financial stability should not be an explicit concern of monetary policy, there is considerable disagreement over – among other things – the weight that financial stability concerns should carry compared with traditional monetary policy goals of price stability and maximum employment. this morning i will offer some comments on this ongoing debate. in part, these remarks will give my perspective on some of the familiar points of contention, such as the relative priority and role of nonmonetary, compared with monetary, policy instruments in responding to risks to financial stability. i also want to suggest that the cumulative effect over the past few decades of changes in financial technology, financial regulation, monetary policy itself, and perhaps the real economy have significantly altered the ways in which monetary instruments transmit through to the real economy. these changes may argue for refinement of monetary policy tools. they may also indicate the need for regulatory measures that are neither time varying nor limited to prudentially regulated firms, so as to provide a more stable financial foundation within which monetary policy will operate. the role of monetary policy in restoring financial stability the federal reserve, as we have been reminded by many accounts on the occasion of its centennial, was created largely in response to what we would now call financial stability concerns, as specifically revealed by the panic of 1907. when confronted with an even deeper financial panic a hundred years later, the federal reserve deployed its full range of policy tools – monetary policy, lender of last resort, and supervision – in an effort to stabilize the u. s. financial system. the federal reserve cut the federal funds rate to nearly zero by