of the spav law is accomplished. as the financial environment becomes increasingly global and liberalized, bsp saw the need to align the local banking practices with internationally accepted standards. we are upgrading the banking system ’ s capitalization and risk management standards to be fully compliant with basel ii by 2007l we are also institutionalizing corporate governance and financial transparency. by yearend, the banking industry will adopt the new international accounting standards ( ias / ifrs ). the monetary board very recently approved the implementing guidelines. we are likewise improving the current regulatory framework through close coordination with other local and foreign financial regulators. i am happy to report that the financial sector forum, our partnership with local financial regulators ( sec, ic and pdic ), is now fully operational with major projects currently underway. these projects include conglomerate mapping, information sharing, joint examination arrangements, rules harmonization and financial literacy. the domestic capital market remains shallow and underdeveloped. in response, the bsp has issued various circulars diversifying the financial products available in the capital market. traded papers like unsecured subordinated debts ( as tier 2 supplementary capital ), long - term negotiable certificates of deposits or ltncds, documented repos, and securitization structures create market - oriented opportunities for banks and other players and deepen the capital market. the bsp has also been fully supportive of the establishment of the fixed - income exchange ( fie ) as an infrastructure for the secondary trading of fixed income and other debt securities. this envisages the trading, clearing, settlement and delivery of securities in a transparent and efficient manner. recently, the bsp issued the implementing rules of circular no. 392 to fully operationalize the rules on proper delivery of securities including the role of third party custodians. we are just awaiting the last missing step that is the interconnection of all key debt market participants to ross2 ] to create a truly seamless infrastructure for fixed income. combined resources of which account for almost 90 percent of the total resources of the banking system. registry of scriptless securities of the bureau of treasury. we have also started revitalizing the trust business to widen investor base with the gradual phase out of common trust fund ( ctf ) for a better product called unit investment trust fund ( uitf ). uitfs enhance the credibility of pooled funds to investors as the value of investments is mark - to - market, paving the way for long -

##ble salary, depreciation of fixed assets and others that i just mentioned, such as r & d expenditure, advertisement expenditure, risk provisioning and loss write - off etc. if those items could be reflected accurately in the tax base, the profits will also be accurate too. third, there is the problem of enterprises ’ undertaking social functions. we have a very clear direction of relieving enterprises of their social functions. but things are not that simple. in fact, enterprises are still responsible, to varying degrees, for some social functions and working to preserve stability. it is feasible to transfer the function of providing employment, pensioning, and health cares from enterprises if we could have clearly defined responsibilities. otherwise, “ responsibility vacuum ” is really troublesome if no social entities take over those social functions. this is potentially possible since reform of social institutions needs much time to complete. fourth, it is related to many public companies. their legacy companies coexist with them and their relations need to be tackled. some enterprises underwent cosmetic restructuring to get listed in the stock market simply to raise funds, thus it is unnecessary to keep the legacy company. in most cases, there are differences within an enterprise group. some are growing while others are on the decline ; some are well managed and work really hard while others owe it to themselves for the bad performance. at the time of going to the capital market and structural design, consideration should be given to an effective incentive mechanism, moral hazards and striking a balance between the rich and poor. to solve these problems, enterprises have a part to play ; at the same time, it has something to do with the state ’ s obligations and historical reasons. my personal preference is quite clear. i don ’ t think we should underestimate those supporting measures. only with concerted efforts to promote enterprise reform and take supporting measures can we smoothly solve the problem of returns on state investment. 4. who should be paid dividends? there is no doubt to whom the state - owned enterprises and state holding companies should pay dividends. clear definition of property rights can be found in the company law, differing from the traditional definition of absolute and relative ownership in the contract - based responsibility system. compared with some advanced countries and emerging market economies, where the share of stateowned enterprises in the gdp is 2 percent or 5 percent only, ours is much larger. accordingly, it is necessary to have multi - leveled operational management. should each level have capital operation rights? we can