amplified through a variety of channels, including through accounting standards for both mark - to - market assets and held - to - maturity loans, margining practices and through the build up and release of leverage among the financial institutions, firms and consumers. failure to capture major on - and off - balance sheet risks as well as derivative related exposures, was also a key destabilising factor. the provisions of ias 39 - financial instruments - recognition and measurement issued by the international accounting standards board ( iasb ), establishes the principles for recognizing and measuring financial assets and financial liabilities. this standard is of particular importance to the banking sector and nbfcs which deal primarily in financial instruments. ias 39 includes provisions about classification of financial instruments, their ongoing measurement ( including when impairment is required ) and derecognition. the provisions of ias 39 are currently applicable globally in respect of financial instruments. following the crisis, there was widespread criticism that the accounting standards, more so, fair value accounting significantly contributed to the financial crisis or at the very least exacerbated the severity of the crisis, in view of its failure to deal with illiquid markets and distressed sales. the g 20 working group on “ enhancing sound regulation and strengthening transparency ” recommended that accounting standard setters should strengthen accounting recognition of loan loss provisions by considering alternative approaches for recognizing and measuring loan losses that incorporate a broader range of available credit information. the g 20 working group also recommended that the international accounting standards board ( iasb ) should enhance its efforts to facilitate the global convergence towards a single set of high - quality accounting standards by sharing the experience of countries that have completed this process and by providing technical assistance. another significant recommendation was that accounting standard setters should accelerate efforts to reduce the complexity of accounting standards for financial instruments and enhance presentation standards to allow the users of financial statements to better assess the uncertainty surrounding the valuation of financial instruments. in april 2009, in response to the input received on its work responding to financial crisis, and following the conclusions of the g 20 leaders and the recommendations of international bodies such as the financial stability board, the iasb announced an accelerated timetable for replacing the principal standard for recognition and measurement of financial instrumentsias 39. ias 39 is sought to be replaced by ifrs 9 in three phases. the first phase was completed with the issue of the portion of ifrs 9 which deals with the classification and measurement of financial assets and financial liabilities. the second and third phases are in the

##rences of similar incidents. idrbt has been nominated as the sectoral cert for banking and financial sector. i suggest that banks coordinate with idrbt and make use of this for fighting cyber intrusion. it vision document 2011 - 17 38. coming to the concluding part of my address, i would like to draw your attention to the rbi ’ s recently released it vision document for 2011 - 17, the major recommendations of which relate to transforming the rbi into a knowledge organisation, using it as a strategic resource, improving it governance and reviewing of it processes for better alignment between business objectives and it. the action points that emerge for rbi and banks from this document relate to the following issues : focus for rbi 39. the main recommendation is for the reserve bank to transform itself into an information intensive knowledge organisation. other recommendations include harnessing human resource potential, migrating to enterprise architecture for it systems and adopting appropriate business process re - engineering. conformity to internationally accepted standards and usage of business intelligence from data warehouse for optimal management information systems ( mis ) with effective decision support systems ( dss ) are also recommended. 40. improved it governance, effective project management, evolution of well defined information policies as well as information security frameworks, better vendor management and outsourcing practices are the other significant recommendations of the document. the document also suggests reviewing of it processes for better alignment between business objectives and it. focus for banks 41. the vision document sets priorities for commercial banks to move forward from their core banking solutions to enhanced use of it in areas such as mis, regulatory reporting, overall risk management, financial inclusion and customer relationship management. it also dwells on the possible operational risks arising out of adopting technology in the banking sector which could affect financial stability and emphasizes the need for internal controls, risk mitigation systems, fraud detection / prevention and business continuity plans. 42. although banks have deployed technology for transaction processing, analytical processing by banks is still in a nascent stage. banks may work towards reaping benefits of technology in terms of cost reduction, improved customer services and effective flow of information within the banks and to the regulator. the reserve bank has drawn up an action plan to implement the recommendations of the vision document. a high powered committee has also been constituted in the reserve bank which has the responsibility to ensure time bound and effective implementation of these recommendations. bis central bankers ’ speeches conclusion 43. in conclusion, i would like to say that banks need to take a disciplined approach to it architecture,