operative and the government ’ s determination to tackle this problem. at the same time, we recognized that the trade finance arrears that had been built up by some indonesian banks during the currency and financial turmoil were prejudicing current access by indonesian entities to trade financing across the entire economy. we agreed to settle these arrears and have paid the due amount. most recently, in december 1998, we cleared additional arrears. this was, we believe, an important signal to the international banking community. in addition, for those banks that agreed to maintain their trade financing activities in indonesia, we agreed to guarantee all new trade finance facilities for a year after we received confirmation of these banks ’ commitment. turning again briefly to the corporate sector which had been reluctant to enter discussions with its creditors, we also agreed in june 1998 to set up an agency, the indonesian debt restructuring agency or indra, to provide foreign exchange protection to those borrowers that had renegotiated their debts with their creditors. strengthening these borrowers by reducing their residual foreign exchange risk improves their creditworthiness, thereby creating an incentive to complete a restructuring. these efforts were followed by the jakarta initiative in september 1998 which aimed at setting the right framework and incentives for bilateral debtor / creditor negotiations. these measures combined, and the real money that has been paid to foreign creditors, in particular by bank indonesia, show our real determination to resolve the current situation. indeed our support has been proven with the expenditure of very large sums of our scarce foreign exchange resources reflecting the high priority we give this subject. i would urge you, therefore, not to adopt a reflexive reduction in your activities in indonesia. instead, please do focus on the systems in place now and the opportunities open to you within our new strengthened framework. another very important point i would like to mention here is the high levels of capital - backing required in some jurisdictions on new lending to indonesia. we believe these levels of provisions are excessive and that they constitute a great hindrance to a resumption of activity in our economy. let me also take this opportunity to share with you some developments in our banking restructuring program. it is not a secret that the pre - crisis indonesian financial system was unhealthily fragile and vulnerable to external shocks. we certainly underestimated the vulnerability of our domestic banking system to a crisis in the corporate sector and its potential to paralyze the banking sector ; we also probably underestimated the riskiness of many loans

for otc derivatives. this step would complement the higher capital requirement for non - centrally cleared otc derivatives regulation issued in september 2016. 14. transforming shadow banking into resilient market - based finance. compared to other elements of the reform, internationally - wide implementation of the agreed reforms related to shadow banking remains at relative early stage. the fsb and jurisdictions are planning to conduct more work to assess and respond to potential financial stability risk in this area. 15. with regards to monitoring and regulation of non - bank financial entities ( nbfes ), the indonesian fsa is responsible to supervise these institutions. it also has the authority to pass regulations on new and existing nbfes activities. bank indonesia also performs periodic assessments of emerging non - bank financial intermediary activities from a macroprudential perspective. efforts to reduce gaps between the risk assessment framework for nbfes and the banking system are on - going. ladies and gentlemen, 16. implementation of the reforms is challenging. of importance, is ensuring that the implementation of the regulatory reforms does not impair the ongoing economic recovery process and that resilience of the banking system is preserved. 4 of 6 17. we noted several challenges need to be address. first, with regards to bcbs review of the regulatory treatment of sovereign risk. we underline the need to undertake due consideration on the important role of sovereign debt in monetary operation, the financial market and economic development financing, especially in emerging economies. a one - size - fits - all approach may not be suitable due to different sovereign instrument and financial market characteristics among regions. 18. second, revision on the standardized approach for credit risk and market risk. bcbs is working on revising the standardized approaches for credit risk and has revised the framework for market risk to enhance robustness and risk sensitivity of both framework. consequently, the standardized approach will be more granular and complex. on the other hand, indonesian banks mostly engage in traditional banking activities. hence, regulators and the industry will need to adjust their skills and information system accordingly. 19. last but not least, as a number of regulatory reforms are finalized, member jurisdictions including indonesia are expected to implement these reforms expeditiously according to the commited time line. given limited resources, authorities will need to strengthen coordination to ensure full and timely implementation. ladies and gentlemen, 20. i have no doubt the 12th asia - pacific high level meeting on banking supervision will be fruitful as we have an excellent line of speakers,