right morally, and it is also fraught with problems from a financial - stability viewpoint. the fact that it is not the originators of the crisis that have to foot the bill induces moral hazard and this, in turn, promotes risk - prone behaviour and increases the likelihood of future crises. for these reasons alone, it is important to enhance the resilience of the financial system and, by doing so reduce the necessity for public bail - outs. this goal could be pursued by strengthening two consecutive lines of defence. the first line of defence would comprise measures that reduce the likelihood of banks failing in the first place. the second line of defence would consist of instruments that reduce the systemic impact of actual or looming bank failures. let us take a closer look at the relevant measures and instruments that are under discussion. 3. reducing the likelihood of individual bank failures the most comprehensive proposal to reduce the likelihood of individual bank failures is the reform of capital requirements within the basel ii framework. this is based on the assumption that, for the individual institution, capital requirements constitute the central buffer against losses. however, the crisis revealed that the overall level of capital that banks were required to hold was insufficient compared with the magnitude of the losses. at the same time, it became apparent that the loss - absorbing capacity of the capital held was too low. consequently, vigorous efforts are being put into adjusting the capital requirements within the basel ii framework. the explicit goal is to promote a more resilient banking sector by raising not only the level but also the quality, consistency and transparency of the capital base. given the particular risks resulting from the failure of a systemic bank, the introduction of a special capital surcharge for systemic banks is being discussed. this would not only enhance the resilience of such institutions, it would also make it less attractive to become systemically relevant in the first place. an outline of the complete set of measures was published in december 2009. currently, the proposed measures are being analysed in a comprehensive quantitative impact study, and in the course of 2010 they will be calibrated and finalised. together with new standards for liquidity provisions, the new rules should be implemented by 2012. a second proposal to reduce the likelihood of bank failures was put forward by the german council of economic experts, and similar proposals have been made by others. the proposal features a european stabilisation fund. the thinking behind this might initially seem to be not too different from the underlying concept of basel ii.

do not need to go through the tedious process of filling up forms and providing hardcopy documents to banks for verification. and they certainly don ’ t need to go to the bank branch. banks benefit from higher productivity and better risk management. second, secure and seamless payments through paynow. paynow was jointly developed by mas and the banking industry. it enables individuals and businesses to transfer funds using just the personal id number or mobile phone number or unique entity number of their recipients. it operates 24 - by - 7 and funds can be transferred directly from one bank account to another in real - time. i can now send money to my friend in just three clicks on my smart phone – all i need to know is his mobile number. business users of paynow can generate a qr code containing their unique entity number. this means i can now pay my utilities provider, telephone company, or plumber by simply scanning their qr code using my smart phone and keying in the amount to be transferred. let me now move on to the second way in which technology can benefit finance – strengthening risk management. risk management and compliance have become major cost drivers in financial institutions since the global financial crisis. processes have become slower and more cumbersome. the answer does not lie in lowering regulatory requirements or risk management standards. we know from 2008 what that can lead to. instead, financial institutions should harness technology to make risk management and compliance more efficient and effective. technology can improve the efficiency of risk management. jp morgan is using machine learning to review loan contracts. this reduces the review time from 360, 000 man - hours to seconds. it also minimises human errors. ocbc bank in singapore is using machine learning to monitor customer transactions realtime and across multiple channels. this allows the bank to identify fraudulent fund transfers and take more timely actions to recover the funds. technology can make risk management less passive and more predictive by harnessing the informational value of data. ping an insurance has developed a system that detects whether a banking customer is lying about the reason for borrowing money. it is based on subtle changes in customers ’ facial expressions, with the analytical algorithm based on 30, 000 videos of real lending cases. according to ping an, this has helped to reduce credit losses by 60 %. blackrock and rhodium are using data analytics to assess the risks of climate change to assets such as mortgage backed securities under different scenarios. we have not tapped on the full potential of