this regard, i refer the term liquidity as central bank ’ s reserve money. this is also reflected in the volume of bank indonesia ’ s open market operation – banks ’ liquidity that bank indonesia absorb, as part of bank indonesia ’ s monetary policy implementation to maintain short - term money market ( overnight puab ) stable around bi rate. this is cash alike in banks ’ assets. this is actually a rather common phenomenon in countries that experienced financial crisis and had to bail - out the financial industry. for example, in the us, the central bank balance sheet has ballooned from around usd 800 billion before crises into around usd 2. 2 trillion recently. this data also reflected in the us commercial banks or other financial institutions ’ placement – usually in overnight basis as excess reserve and now remunerated at 25 bps – in the federal reserve. thus, in essence similar to bank placement in bank indonesia ’ s omo instrument ( sbis. fasbi, ftk ). the situation i just described was needed to facilitate the domestic banking sector consolidation process in the post 1997 / 98 crisis. however, if this continue to exist too long, will lead to a mislead incentives. it will not encourage banks to have a more efficient asset and liabilities management. also, banks will tend to be less aware to liquidity risk, as there will be a perception that there will always be a huge supply of liquidity in inter - bank money market. this can be seen during the peak of global financial turmoil at the end quarter of last year, where our domestic money market also experienced a significant “ perception ” of tightening liquidity, despite that there was a large number of liquidity stock in the money market. there was more than rp. 150 trillion of banks ’ cash, placed into bank indonesia ’ s omo instruments. yet, the inter - bank money market indicators showed that the flow of liquidity in inter - bank money market has squeezed. the volume of inter - bank money market has declined from its normal level of around rp. 10 trillion to below rp. 5 trillion. the interest rate spread has also widened significantly. the jibor 1 month spread over bi rate jumped from its normal level of around 50 bps to around 220 bps. further, there was also indication of unhealthy competition among banks, to maintain third party ’ s fund by offering higher deposit rate. second, there is large number of government bonds ( sun ) in banks

and more liberal capital account policies do not solve all the exchange rate problems. despite the sound policies in place, we frequently witness sharp volatility which is due to speculative capital flows and not justified by its fundamentals. at the same time we have progressed quite liberally in terms of our capital and current account policies. the adoption of these policies was endorsed by multilateral agencies, including the imf, during the height of the asian crisis. it is therefore my hope that all of us in this symposium come up with a set of viable policy options to address this issue of speculative flows in asia. in particular, i would appreciate views from the imf. fellow governors, on that final note i would like to end my speech. those developments in the aftermath of the crisis that i have mentioned will certainly influence the economic dynamism and prospects of east asia in general and asean in particular. i am looking forward to fruitful discussions in this symposium. going forward, it is my hope that we can engage in greater policy cooperation and coordination in east asia.