in these economies, but it also poses a potential risk to the rest of the world. for example, it could push even more capital flows in the direction of emerging economies like malaysia. the crisis has also stretched the fiscal position of governments, both in the advanced and emerging economies. in some cases, such deterioration was related to dealing with the effects of the crisis ( e. g., from bank rescues ) and the low gdp growth post - crisis, in others it reflects the outcome of years of unwise fiscal spending. whatever the reasons, constrained fiscal positions mean a reduced capacity to support economic activity and a reduced ability to deal with future crisis and shocks. it also means that monetary policy may be called on to do more than it can realistically deliver – a phenomenon we are already witnessing in the advanced economies. a related policy issue has to do with structural reforms. this is a topic that has been much discussed in the post - crisis years. the trans - atlantic crisis was a blow - up of large imbalances and distortions – both real and financial – built over many bis central bankers ’ speeches years. it reflects policymakers delaying or ignoring needed reforms. the experience has once again provided the lesson that the longer such imbalances are ignored and allowed to pile up, the bigger the mess when the whole pile finally comes crashing down. structural reforms are certainly needed in many of the crisis affected advanced economies. but they are also needed in many emes, including in malaysia. they are needed to ensure that economic growth is based on strong foundations and therefore will be more sustained and sustainable. yet, the pace of structural reforms in most economies has been very slow and has lacked momentum. the main reason behind this inertia is often the stranglehold of vested interest. on this point, let me quote mr. travis kelanik, the founder of the taxi service app uber, which last week caused the black cab drivers in london to go on strike. he was reported in the wall street journal as saying : “ … there ’ s so much corruption and so much cronyism in the taxi industry and so much regulatory capture that if you ask permission up front for something that is already legal, you ’ ll never get it. there ’ s is no upside to them. ” clearly, the taxi industry is not the only one that has this characteristics, nor is it the only one that would be resistant to competition and structural change. another reason for the inertia is that

pose significant risks at the global level : an uneven recovery, diverging economic policies, protracted low levels of interest rates, increased sovereign debts, large imbalances in international payments, and pressures on exchange rates. correspondingly, we should continue to improve international cooperation. there are three main priority areas : – first we need to complete the reform of the international financial system ; – second, we have to develop a better system of macroprudential surveillance, refining the authorities ’ ability to identify systemic risk and, especially, to act upon early warnings ; – third, crucially, we need to establish a coherent set of norms, rules of conduct and formal institutions shaping coordination of national economic policies. we have come a long way towards strengthening the financial system since the crisis began. my own experience in the financial stability board is that it is certainly possible – at times bis central bankers ’ speeches even surprisingly easy – to come to a shared diagnosis and devise a common response even to extremely complex problems, when there is a willingness to do so. the new basel iii regulatory framework is now in place, with new capital and liquidity requirements and limits to financial leverage. its gradual phasing - in will prevent it from hampering the economic recovery. the over - the - counter derivatives markets will have a sounder and more transparent basis. we have identified many of the perverse incentives that encouraged excessive risk taking – in banks ’ executive compensation systems, in the role of credit rating agencies and in accounting rules – and we have begun to rectify them. the activity of the fsb is now concentrating – in accordance with the mandate given by the g20 – on two crucial priorities : tackling the moral hazard problem posed by systemically important institutions ( sifis ) and extending the rules to the “ shadow banking system ”. the reform of the financial system is however not complete. there is a danger that, as the world economic recovery advances, the sense of urgency – a major propeller so far – might now weaken. it would be unforgivable not to keep the momentum in international cooperation and miss the occasion to decisively strengthen the international financial system. there are two obvious compelling reasons for this. first, neither our public finances nor our citizens would be ready to withstand a new crisis. second, in a global system where external imbalances remain large and capital flows may be subject to sudden reversals, it is essential to rely on a financial system that is at the same time