regulation on credit risk management by requiring banks that before granting a loan, they should assure that no currency mismatches exist in debtors ’ balance sheets. this regulation can be imposed by host authorities to subsidiaries in their jurisdictions, and also, by home regulators to the banking group as a whole regarding each of its subsidiaries. this means for example that home regulators ask that the parent bank and each subsidiary inside the group must comply with that requirement. if not, penalties should be imposed, such as increases in capital requirements. the effect of that kind of currency mismatches could be explicitly considered in the pilar ii of the basel ii agreement. if the effect of currency mismatches are not properly attended by banks, supervisors at the banking group level, should require additional capital to attend the potential effect, at the banking group level, of the worsening of debtors´ income in hosts markets, and therefore, in subsidiaries capital position and then, in parent bank capital positions. also, the potential effects of currency mismatches should be explicitly addressed in supervisory colleges. credit risk transfer is another key aspect of the agenda. instead of reducing systemic risks, credit default swaps have contributed to raising them. risk is not always shifted to the parties that are best able to bear it, but to those subject to laxer regulatory constraints. another topic important to highlight, because of its relevance for emerging markets economies, is the lack of transparency and absence of reliable statistics in the otc derivatives markets for non - financial corporations. this opacity left policy - makers without information about exposures on otc transactions done with foreign financial institutions. as we know, the consequences of these exposures in some emerging markets were systemically important and central banks had to provide financial assistance to the market, to avoid major financial distress. we must work towards encouraging the trading of credit derivatives using electronic platforms or regulated exchanges and the clearing of standardized credit derivatives through a central counterparty. this would help to reduce risk, in part by allowing for the multilateral netting of outstanding notional amounts, and, on the other hand, by the requirement of posting collateral. however, if central banks promote its usage they should be prepared to provide it with access to central bank credit facilities, or to provide liquidity by other means in case of need. a macro - prudential approach recommends that regulators and supervisors should consider potential systemic risk and the vulnerabilities of the environment in which financial institutions act. it will be fundamental to

participants as a credible and reliable benchmark. similar to a few other jurisdictions in the region, hong kong will adopt a multiple - rate approach. in other words, honia and hibor will co - exist in the market and market participants are free to choose between them. meanwhile, tma will continue to strengthen hibor to ensure that it remains in compliance with international standards. 20. of course, we are facing the irony that if hibor remains, market players may see little incentive to develop and trade honia - based products. however, i encourage all market participants to start exploring how to incorporate honia into their business. it may be true that hibor will last for some more time. but the transition to sofr in the usd space could gradually lead to changes in market practices and conventions that may eventually shift market preference for interest rate benchmarks. therefore, if more honia - based products can be introduced in the market going forward, it would help reduce any market impact in 3 / 4 bis central bankers'speeches case hibor has to discontinue one day owing to changes in market circumstances. closing 21. ladies and gentlemen, as we have learned from speakers earlier this morning, interest rate benchmark reform is complex, but it is something too important for any market participant to ignore. when libor ceases to exist, there will certainly be an impact on global financial markets. some people may say end - 2021 seems a long way off. but it ’ s not, given the tremendous amount of preparatory work required to ensure a smooth transition. no one in the market can afford to play a waiting game. let ’ s all devote resources now, and work closely together on this important task. 22. thank you. 4 / 4 bis central bankers'speeches