industry will be achieved through bank restructuring in harmony with the appropriate business scale and capital requirement, as well as increasing the capacity to absorb business risk. in addition, several regulations will cover, among others, mergers, consolidation, sources of funds for bank acquisition, the terms for bank acquisitions, the role of individual / family owners, as well as the terms and conditions of business development. d. policy to deepen the financial market will encourage the development of financial products that can be used as an alternative by banks for productive channelling and placements to the real sector, especially infrastructure financing. therefore, the financial market is expected to become more liquid with banks becoming less dependent on bi instruments. 2. improving the bank intermediation function through refined regulations and greater availability of supporting infrastructure. the regulations in question include the statutory reserve requirement, optimizing the efficiency of bank operations and simplifying the terms and conditions governing foreign exchange in order to stimulate credit allocation. bi will also help form an institution to supply credit basis data per sector, per region to assist banks asses risk. 3. expanding the role played by sharia banks in the national economy and bolstering resilience. sharia banking policy will become more intensive to raise capital, facilitate the development of sharia business units and facilitate the requirement for competent sharia human resources. 4. improving the role of rural banks in terms of micro finance and strengthening resilience. this policy will become more intensive, among others, to raise capital and facilitate the requirement for competent human resources, as well as assert the position of rural banks as community banks. a need will arise after the global crisis for a systemic regulator that can monitor the soundness and stability of the financial system as a whole. the role of such an institution will be to collate, analyze and report information regarding significant interactions on the markets and inter - institutional risk ; investigate whether an institution is exposing the financial system to systemic risk ; design and implement regulations ; and coordinate with other regulatory institutions, including the fiscal authority, to resolve systemic crises that may emerge. there are three reasons why the central bank may take the role of systemic regulator. first, the central bank has daily contact with market players in its function of implementing monetary policy. second, the responsibility of maintaining macro - economic stability corresponds closely with guaranteeing financial system stability. history has shown that economic crises around the world are always linked to financial crises ; therefore, the central bank naturally has to consider interactions between the financial

way between almost all ownership of major banking institutions and other financial industry corporations ( such as insurance, money market, securities, mutual funds, and other related derivative activities ). over time, this has rapidly become widespread practice, producing a change in the nature of a bank ’ s business from conventional operations to the more complex business of universal banking. universal banking is a development that we must anticipate as part of the future of the national banking industry. considering the possible consequences, we will be very cautious and selective in the policy to open the possibility to universal banking activities in indonesia. fourth, strengthen bank internal management. the fast pace development of information technology requires a level playing field in banking activities to enable the global market to be accessible from all corners of the world. this will force us to realign our operational standards in order to survive and to win in the competitive international banking world. understanding the importance of this issue, in the coming years, the implementation of best practices in good governance and basel ii should become our focus of attention. it is hoped that when the time comes where the momentum of strengthening shifts to become the momentum of growth, we will be equipped with effective operational capacities which allow us to dynamically move forward in a sustainable manner. fifth, improve the banking industry infrastructure. we realize that a strong stable financial system, an efficient and effective operating industry, and consumers that fully understand their rights and obligations will only materialize given that the supporting infrastructure is able to facilitate the developing dynamics. it is for that reason that improvements of banking industry must receive top priority. in 2006, bank indonesia will improve and strengthen infrastructures in five areas, i. e., improving the financial sector safety net, the establishment of apex banks for rural banks ( bpr ’ s ), banking mediation agency, bank research institutions in various areas of indonesia, and the regulation of card based payment facilities. distinguished guests, ladies and gentlemen : all of this is what i intend to convey to you tonight. it is not hard to imagine the magnitude of problems we must face ahead if we fail to act correctly and quickly. our economic growth prospect is less than optimal, world oil prices may endure shocks, global imbalances are predicted to rise, and inflation pressure risks remain high. all the while, our time to act is very limited before the effects of those various problems make its way to the banking and financial industry, and ultimately to our daily lives. this gives us great reason not to delay our actions. it