to affirm that our banking system, in all its vital components – rural and cooperative banks, thrift banks, and commercial and universal banks, is in much better shape today than it was during the last crisis we faced. and i can tell you, the monetary board and the rest of the bangko sentral ng pilipinas family remain confident that our banking system can work through these challenges. i assure you, this is not meant to be a self - acclamation. rather, it is our tribute to the collective efforts we have invested in our shared future. as a community of stakeholders, it is this common future that requires of us.. shared responsibilities to take on challenges together in order to grow and gain as one. i refer specifically to the bankers association of the philippines, the chamber of thrift banks and the rural bankers association of the philippines. the bangko sentral ng pilipinas thanks you and salutes your efforts in sustaining economic activities not only in urban centers but also in the countryside through responsible and responsive banking. ladies and gentlemen, let us give a round of applause to the philippine banking sector. there is a saying that it is okay to build sand castles in the sky for as long as our feet are well planted on the ground. what is the context, what do i mean by this? there are three points i wish to make. first, the best strategy is always to move forward as one. this is not an inspirational punch line but the hard reality of market dynamics. we appreciate that banks are inherently business concerns, but protecting the institutional bottom line requires nurturing sustainable relationships in a thriving environment. what is not too obvious is that the financial system as a whole moves forward only when we work together. ultimately, it is this stability from working together that gets us through the business cycles, even as this starts from a position of competing interests. as competitive elements within one system, we can always agree to disagree but we cannot fall into the trap of disagreeing to agree. second, it is critical that any lingering risk aversion from whatever source does not spill over into our ability to provide needed financial services for our real economy. global conditions will be challenging. but in the same breath, let us not allow fears of off - shore conditions to pre - judge our on - shore actions, when and where such links are not warranted. if we are to consolidate our position of relative strength, we need to seize opportunities when they present themselves, while

is under no such compulsion ”. and ever since then, the absence of an effective symmetric framework of obligations on both debtor and creditor countries has led to periodic crises. the obstacle to the creation of a binding framework is clear. governments know whether they are debtors or creditors today. so a framework that has economic and indeed moral force when seen from behind the “ veil of ignorance ”, as suggested by john rawls, is unlikely to appeal to governments. should we conclude, therefore, that in the absence of a world government, the identification of “ new rules of the game ” is likely to be no more than a theoretical exercise? certainly, the fate of keynes ’ proposal for an international clearing union is not encouraging. but the experience of the past twenty years shows that large imbalances mean that everyone suffers when there is a sharp adjustment. so there is scope, if not for formal international policy coordination, then for an international conversation about how to improve a system that is fragile. central banks were able to ensure, for a while, that the paths of output were sustainable – consistent with low and stable inflation. but the patterns of demand were far from sustainable. and when the sharp adjustment to demand eventually came, it inevitably had implications for the level of output. reform of the imfs, and of our domestic financial systems, is a necessary complement to the domestic price stability oriented policy frameworks of central banks. the immediate issue of how to move to a more sustainable position requires a resolution of different countries ’ economic strategies for rebalancing. there can be only one path for rebalancing – with rebalancing in the deficit economies, by definition, just a mirror of that in the surplus countries. but the path that would be chosen by high - saving economies differs from that which the more indebted industrialised economies would prefer. their need to deleverage and reduce borrowing means that if another abrupt adjustment is to be avoided, they cannot risk taking too long to rebalance their economies. in contrast, many of the emerging economies continue to require rapid economic growth and abundant employment opportunities in their export industries to ensure adequate levels of employment for their vast populations. as a result, policymakers in countries like china quite simply see limits to the extent and speed at which they should expand the share of domestic demand in their economies. they do not want to rebalance their economies too quickly. of course, ex post there must be consistency between these two strategies as demand in