glass - steagall act of 1930 had by and large prevented major financial catastrophes from happening. regrettably, its repeal in 1999 opened a pandora ’ s box. i am very much in favour of the recommendations of the financial veteran, mr. paul volcker. he advocates the banning of proprietary trading of deposit taking banks, who should not be allowed to own hedge funds or private equity funds. in addition, a cap is to be imposed on financial institutions to prevent them from growing too big which gives rise to systemic risks. if the volcker ’ s rules are adopted, we shall have a much stable global financial system. 17 ) it is worthwhile mentioning that both credit rating agencies and derivatives should be put under the microscope of regulators. the woes brought about by rating agencies in rating securities, financial institutions and even sovereign countries have been known too well to our dear audience. i therefore do not want to go into details but call upon regulators globally either to have these agencies to put under supervision or we just discount the ratings in enforcing capital requirement calculations. the rating agencies should be made impartial and should stay away from any conflict of interest. 18 ) the control on derivatives, or otherwise known as “ financial weapons of mass destruction ” should be put under closer supervision. there is no need for me to state the very obvious “ market risk ” and “ counterparty risk ”, which led to widespread systemic risk in the last financial crisis. we should seriously consider the requirement that they must be standardized and traded in exchanges and clearing houses. 19 ) it has been proven that international cooperation is paramount before and after the outbreak in the context of financial stability. therefore cross - border regulatory supervision should be absolutely upheld for multi - national financial institutions. the malpractice of “ regulatory arbitrage ” should not be allowed to exist. imf staff have proposed the creation of an integrated framework for crisis management and resolution, including a european resolution authority ( the “ era ” ) for cross - border banks in europe. the existence of such a body will greatly reduce impact on the european financial system when a major financial crisis has erupted. it appears that the idea of era may perhaps expand internationally to provide a more stable financial environment in the event that an international financial crisis occurs. cross - border supervision is particularly important to macao as the majority of banks operating in macao are financed by overseas capital. epilogue 20 ) so far, the degree of recovery varies from one economy to another. the asian

aspects of the macao economy in its assessment. this year, our overall score is 72. 5 making macao the 6th freest economy in asia pacific and 20th freest globally. 5 ) inevitably, we are not immune to the destruction inflicted by the international financial crisis. our financial sector, which consists of banking arm and insurance arm, experienced a small setback as a result of the contraction of the economy. 6 ) at the beginning of the outbreak, the macao special administrative region ( msar ) government took quick and resolute measures to soften the impact. it immediately announced a 100 % guarantee on all onshore bank deposits. a series of measures were kicked out, which included accelerated public investment and expenditure ; various subsidies ; as well as liberal loans extended to small and medium - sized enterprises in order to boost internal demand and employment. the monetary authority of macao also complemented the efforts of the msar government by adopting measures to enhance liquidity of banks when needed, setting up mechanism to more closely monitor the prudential operations of banks and coordinating with neighbouring authorities in order to ensure normal operations and stability of the financial system. 7 ) the above policies and measures, together with the locomotive effect of the china economy, which i am going to mention later, have enabled macao to emerge from the tsunami unscathed. the economic contractions for macao were 12 % and 14. 8 % respectively for the 1st and 2nd quarter of 2009. the 3rd quarter saw a sharp rebound of 8. 8 % followed by a spectacular growth of 27. 4 % in the 4th quarter. the overall result for 2009 is a real growth of 1. 3 %. at the same time, the unemployment rate has been down to an enviable rate of 2. 9 %. due to limited exposure to toxic assets, overall bank profit experienced only a minor setback in 2008. it now returns to pre - eruption level, thanks to the ongoing prudence of our practitioners and the effort of the regulator before and during the eruption. asia and the economy of china – post crisis 8 ) china adopted very fast action to rescue the economy. it announced a stimulus package of rmb4 trillion, which was mainly intended to boost internal consumption, enhance social security, improve health care and rural development. it is worth mentioning that financial institutions of china have not been appreciably affected by toxic assets and hence suffered less from the financial tsunami. as a result, they are in a better