massive costs to the economy. financial safety nets serve two primary purposes, that is to avert risks to financial stability and to reduce the costs to the financial system and economy in the event of a crisis. they also serve an important social purpose of protecting savers and investors. the first component of the financial safety net is the existence of an effective regulatory and supervisory system to ensure the sound management of financial institutions and the ability to deal with problems affecting financial stability. this includes adequate powers and instruments to mitigate losses to the system in the event of a crisis, restore stability and ensure the continuity of the financial intermediation process. the second is the lender of last resort facility that is provided by central banks to address liquidity stresses faced by financial institutions. thirdly, is the deposit insurance scheme that provides a guarantee on deposits to protect the savings of small depositors and reduce the prospects for disruptions that could threaten the stability of the financial system. the effectiveness of the financial safety net depends on several factors. they include the capacity of central banks and supervisory authorities to assess risks, the effective coordination between the different components of the safety net, clear communication strategies and a strong and comprehensive legal framework that supports the operation of the safety net. in malaysia, the malaysia deposit insurance corporation act ( mdic act ) which establishes the malaysian deposit insurance corporation ( mdic ) provides comprehensive intervention powers for the protection of depositors. this is complemented by an extensive operating framework developed between the central bank and the mdic which clearly sets out the responsibilities and obligations of both agencies in promoting financial stability and in financial resolution. in the area of consumer protection, amendments to malaysia's financial services legislation are also being put in place to provide for the establishment, roles and functions of a financial ombudsman to deal expediently and efficiently with disputes concerning financial services between consumers and the financial institutions. let me now turn to the challenges arising from greater financial globalisation and the growing importance of international cooperation in ensuring sustainable economic and financial integration across national borders. in this environment regulators are confronted with the challenge of adapting regulatory and legal norms from a nation - centric system to norms that are more reflective of international business and finance. the issue is how to complement the domestic agenda and the international agenda. regulatory problems arise not only because of the need for domestic regulators – operating within diverse national regulatory norms and cultures – to cooperate and coordinate in the domestic environment but also across jurisdictions. operational and legal issues in cross -

##surate capabilities to conduct monetary policy operations in order to maintain price stability. equally important is the mandate to provide oversight over the money and foreign exchange market to ensure the orderly development and functioning of the markets. these necessary powers are however, combined with a system of checks and balances to enable the bank to act decisively, but yet having in place safeguards so as to enhance transparency and accountability. more extensive powers to achieve financial stability in the area of financial stability, our new central bank act incorporates an explicit mandate of the central bank for financial stability. this mandate is articulated in terms of the risks to financial stability that includes risks that disrupts the financial intermediation process ( including the orderly functioning of the financial markets ), or which affects public confidence. the act also provides comprehensive provisions for heightened surveillance, pre - emptive actions and expanded resolution powers to facilitate the swift and orderly resolution of financial crises. the bank may also take appropriate intervention actions to avert risks that stem from unregulated entities. the act further acknowledges the importance of coordinated policy measures across different agencies whose actions can affect financial stability. accordingly, the new act provides for cooperation arrangements with other supervisory authorities and the ability of the central bank to make recommendations to such authorities on measures or safeguards for promoting financial stability. these new powers are complemented by strengthened institutional arrangements in the form of the establishment of a financial stability executive committee that will be formed to ensure the effective coordination of regulatory authorities in financial resolution. enhanced governance and accountability framework with these enhanced powers, the governance and accountability framework in the act has also been strengthened considerably. this relates to the enhanced role of the board of directors'in the oversight of the management of the bank. in providing enhanced powers to the central bank to address financial stability issues and the strengthening of the oversight function of the bank, correspondingly, focus has also been given to governance, internal controls and risk management by the bank. for this purpose, the central bank of malaysia act 2009 empowers the board to establish three specific committees, namely the board governance committee, board audit committee and board risk committee that are chaired by a non - executive director, to ensure the independence of the oversight on the functioning of the bank. a comprehensive financial system safety net let me now turn to the second key area confronting central banks, namely the need to have in place an effective financial safety net. the global experience in these recent two decades has shown that crises have continued to plague the world and have resulted in