from 50 % currently to 35 % under the standardized approach. similarly, substantial capital savings could be generated from lending to small and medium enterprises ( sme ) that would qualify as retail exposures where the risk weights would be lowered from 100 % to 75 %. the potential impact of lower risk weight for this sector under the standardized approach could result in greater participation by banking institutions in this market segment. bank negara malaysia ’ s initial estimates on the impact of the standardized approach indicated that benefits would be derived by individual institutions in terms of capital savings. however, improvements in a number of areas such as loan identification systems as well as collateral management systems would result in higher capital savings for credit risks under the standardized approach. continuous calibration would be required to ensure that banks under the standardized approach would continue to maximize capital savings for credit risks in view of the requirement for an explicit capital charge for operational risk under the new accord. while the irb approaches promise greater capital savings in the longer term, the adoption of the standardized approach in the transition is considered a more pragmatic option even for some internationally active banking groups. under the irb approaches, banks would need to reach an agreement with the regulator in the countries they operate on the robustness of group internal estimates and validation. the standardized approach is therefore seen to provide the breathing space for a smooth transition to irb approaches while at the same time allowing banking institutions to avail themselves of the benefits of capital savings. different approaches are adopted by regulators ladies and gentlemen, while there has been global acceptance of the broad principles of the new accord, differing implementation approaches are being adopted by different countries. in some countries, regulators have opted for the accord to be applied to all institutions while in others selected banks are being mandated specific approaches. some other regulators have given greater flexibility for banks or have extended the timeline for the implementation of the new accord. these reflect the different considerations and priorities accorded by the various regulators in their policy agenda. in essence, the decision by national regulators are based on a number of common factors, namely, the stage of industry development and market infrastructure, the size and types of institutions involved, the regulatory philosophy and priorities, as well as the economic environment. of importance is to ensure that the implementation of the new accord is consistent with the overall agenda and objectives for the financial sector to facilitate growth and economic expansion. implementation principles for malaysia in malaysia the appropriateness of the new accord is being assessed in the context of our own objective to develop a

a concentration of risks in particular regions or with respect to particular firms. this new awareness, through a rethinking of business strategies, could generate new investment in, for example, computer centers and distribution depots. the accident at the fukushima daiichi nuclear plant has triggered active global discussion on nuclear power policy, which will highlight the importance of energy conservation and environmental technologies. and as japanese firms have an edge in those areas, such as high - end batteries, there will be great room for them to make contributions. iv. tasks ahead for japan ’ s economic rebuilding various challenges lie ahead on the road to overcoming the adverse effects of the earthquake and rebuilding japan ’ s economy. the first challenge is ensuring the necessary financing for rebuilding. in this regard, japan has continued to have a current account surplus. in other words, japan has had an excess of savings over investment for a protracted period, which means that, from a macroeconomic perspective, this financing will not be difficult ( chart 8 ). japan ’ s capacity for foreign currency funding is extremely strong, given that the country is the biggest creditor nation in the world, with net external assets of 2. 9 trillion u. s. dollars, or 57 percent of nominal gdp. private financial institutions are fully able to meet an increase in financing demand for rebuilding. rumors have circulated that japanese insurance companies would sell foreign currency assets due to an increase in payments of insurance claims relating to the earthquake and subsequent events. these companies have ample short - term liquid assets, so they do not need to sell their foreign currency assets in order to make the payments. meanwhile, japanese government bonds have been issued quite smoothly and long - term interest rates have remained stable at low levels compared with other countries. as long as japan continues to work tirelessly toward rebuilding, it is unlikely financing problems will arise. the second challenge is raising japan ’ s potential growth rate. since 2000, japan has had one of the highest gdp growth rates per worker among g - 7 countries, although slightly lower than the united states ( chart 9 ). however, the decline in the working - age population in japan is proceeding at a pace that has no precedent in modern economic history ( chart 10 ). as a result, japan ’ s economic growth has been on a downtrend. raising the potential growth rate was the biggest challenge for japan ’ s economy even before the earthquake, but the efforts to do so by raising both the labor participation rate and productivity have now become all