the lowest risk - based surcharges of the eight g - sibs - - currently 1 - ½ percent - - but their leverage surcharge is 2 percent. this is especially problematic for their operations, since they prudently reinvest custody customer deposits into safe and liquid assets. some market observers and participants believe that current capital requirements have impinged somewhat on market liquidity for treasuries. while this claim is hard to prove with existing data, particularly given the difficulties of determining optimal levels of liquidity, it seems reasonable to assume that a very high leverage ratio would seriously constrict market making in treasuries. i think it would be sensible for the banking agencies to consider altering the enhanced supplementary leverage ratio requirement so that it would be set with an eye toward the riskbased surcharge. one, but certainly not the only, way to do this would be for the enhanced supplemental leverage ratio to be 1 percent for the firms with a 1 percent to 1 - ½ percent riskbased surcharge, 1 - ½ percent for those with a 2 percent or 2 - ½ percent risk - based surcharge, and 2 percent for those at 3 percent or above. an alternative approach to mitigating the distortionary effects of the leverage ratio requirements is to exclude certain “ riskless ” assets from the denominator. some central bankers around the world have been arguing to exclude central bank reserves from the leverage ratio denominator, on the ground that they are “ safe ” and that including them may make monetary policy harder to execute in a period of unusually large central bank balance sheets. but this would defeat the whole purpose of a leverage ratio, which is to place a cap on total leverage, no matter what the assets on the other side of the balance sheet may be. cash holdings, for example, are not excluded. this proposal would also create a classic slippery slope risk, which was illustrated during a discussion in which i participated last year. when a central banker raised the idea of excluding reserves, a finance ministry official mused aloud that perhaps sovereign debt should also be excluded. stress testing raising the minimum ratios in leverage and risk - based capital standards, requiring that qualifying regulatory capital be truly loss absorbing, and setting higher requirements for the most systemically important banks have been important steps toward the goal of a well - capitalized, and thus safer, financial system. but the stress testing system begun during the crisis, and continually refined since,

extended financial access through non - mainstream channels and creating alternative sources of financing for borrowers and entrepreneurs. we need to make our financial system more inclusive. if we move forward together on these fronts, we can truly make a positive difference in the lives of many more filipinos. the link between the real economy and our banking market must stay firm so that liquidity in the latter can translate into new productive capacity in the former. as it is, we see sustained growth for our economy in 2012 even as global growth continues to weaken. while the debt crisis in the eurozone persists there are, on the other hand, welcome signs … such as the strengthening of the us economy. here at home, we derive comfort from the fact that the philippine economy has stronger foundations to see us through the global headwinds, thanks to home - grown sources of resilience and reforms we continue to pursue. we also see benefits from the simultaneous running of both monetary and fiscal engines. as early as this month, the department of budget and management has practically released the 2012 budget to implementing agencies. other sources of optimism are the bsp ’ s expectations surveys showing that both business and consumer sentiment remains generally upbeat. ladies and gentlemen. it is providential that the philippines is hosting this year ’ s 45th annual meeting of the asian development bank at a time when our economy is primed for growth. finance secretary and monetary board member cesar purisima is the head of the philippine delegation. the meeting will take place from may 2 to may 5 and we expect about 4, 000 delegates to participate. the preparations are in full - swing and we call on your full support to make the event a success. and so, ladies and gentlemen, on this optimistic note, let us wish our banking community, our economy and our country a happier, healthier and more prosperous 2012 where good governance prevails and growth is truly inclusive. mabuhay ang pilipinas! cheers! thank you everyone and let ’ s enjoy the rest of the evening. bis central bankers ’ speeches