risks and how to keep them in check, we need a macroprudential framework in which various instruments can be combined to optimal effect. what is the best way of achieving this? firstly, it is essential to recognise that ensuring financial stability as a whole is generally dependent on the decisions made by a range of different bodies. these need to act together in order to ensure financial stability. to create the necessary basis for a functioning macroprudential framework, the exact institutional set - up of the regulatory authorities is of the utmost importance. first and foremost, objectives, mandates and responsibilities need to be clearly defined. in switzerland, for instance, finma – the financial market supervisory authority – is responsible for the regulation and supervision of individual banks. the snb, on the other hand, is required to contribute to financial stability. with regard to switzerland ’ s two big banks, there is a clear overlap between institutional and systemic risks. in this context, an exact definition of the responsibilities of the snb and finma is of central importance for optimal macroprudential supervision and regulation. the revised memorandum of understanding between the snb and finma is an important step in this direction. secondly, to ensure that the institutions involved can optimally carry out the roles assigned to them, it is also important to give them the right tools. in concrete terms, this means that the snb would, for example, need to have more extensive information about the stability of financial institutions – regarding their risk exposure, interdependences, etc. – or it would require specific instruments enabling it to take the right decisions when implementing macroprudential policy. thirdly, the crisis made it clear that closer international cooperation between regulatory authorities is vital. functioning international coordination mechanisms are required to counter future crises earlier and more effectively. international cooperation is the only way to check undesirable developments on the globalised financial markets. conclusion ladies and gentlemen, the stable economic growth and low inflation of the last two decades could not prevent the emergence of vast imbalances in the global financial system, as the financial and economic crisis clearly showed. such massive economic shocks are bound to have an impact on how central banks work. nevertheless, ensuring price stability remains our top priority. the crisis made it evident that central banks have an effective set of instruments that can be used to mitigate the negative impact of financial crises. the unconventional measures used in this regard also proved to be effective. yet despite these measures, the cost of

and efficiently. bank negara malaysia was appointed as the single regulatory and supervisory body for dfis under the act. in carrying out the regulatory and supervisory function, the central bank's focus is primarily to promote the development of sound and robust dfis capable of performing their mandated roles effectively. seven dfis are currently placed under the purview of the act. recognising the unique characteristics of each dfi, regulations and policies have largely been tailored - made to suit the different roles and functions of each dfi with the view of facilitating and strengthening their operations. in general, the dfis are required to ensure that their operations and activities are in line with their mandated roles, underpinned by good corporate governance and best practices. they are required t o operate with transparency, especially with regard to information disclosure on their corporate performance, in order to enhance credibility and to harness greater confidence from the public that they serve as well as from the government. strategies formulated have also been focussed on enhancing the clarity in the roles and functions of the dfis, with a view of minimising the overlapping of functions and increasing dfis'effectiveness in serving the targeted sectors. this has led to a number of initiatives to realign and enhance the strategic focus through the restructuring of selected dfis. one is the merger of the exim bank and mecib to enhance their synergy in export promotion. the 4 / 5 other important initiative is the rationalisation of bank pembangunan and bank industri, which will result in the establishment of an sme bank. the sme bank, a specialised agency dedicated to the promotion of sme development, will commence operations in october 2005 and is envisaged to better serve the needs of smes through the provision of a comprehensive range of financial and non - financial services. in particular, the sme bank will focus on nurturing the smes and promoting entrepreneural development, through the provision of financial and business advisory services, including financial management, business diagnosis and marketing support. recognising the importance of human resource development as part of the capacity and capability enhancement strategy, several initiatives have also been undertaken to enhance the skills of dfis, particulary in the provision of advisory services and micro financing. in collaboration with the japan international cooperation agency, bank negara malaysia is currently embarking on a project to enhance the capabilities of dfis in providing advisory services to the smes.