) complementary, merchant banking, or section 4 ( o ) grandfather authority are typically subject to continuous supervision by the federal reserve. that supervisory oversight, for example, includes review of internal management reports, periodic meetings with the personnel responsible for managing and controlling the risks of the firm ’ s commodities activities, and targeted examinations of those activities. the primary goals of our supervision of commodities activities are to monitor the management of risks of those activities to the financial holding companies and assess the adequacy of the firms ’ control environments relating to physical commodities activities. the federal reserve expanded the scope of its examination and review of the firms engaged in physical commodities activities as the events of 2008 and 2009 alluded to earlier brought more firms engaged in commodities activities under the supervisory purview of the federal reserve. in 2009, the federal reserve formed an examination team to conduct horizontal examinations of firms across the liscc portfolio that are engaged in commodities activities. among the supervisory activities taken were additional reviews by examination staff specializing in commodities risk - management practices. during these reviews, the teams examined the ways firms managed risks from commodities activities. in addition, the teams reviewed the firms ’ processes for assessing capital needs associated with these activities. on an ongoing basis, supervisory experts monitored the firms ’ exposures and assessed the strength of the corresponding risk - management and control processes. this work led us to explore possible additional actions in our anpr. the board requires financial holding companies that engage in commodities activities to hold regulatory capital to absorb potential losses from those activities. financial holding companies have long been required to hold capital against the counterparty credit risk from commodity derivatives ( and other types of over - the - counter derivatives ) and against the market risk of all commodity positions. following the financial crisis, the board has strengthened its capital requirements for the credit risk and market risk of these transactions. still, physical commodities activities can pose unique risks to the safety and soundness of financial holding companies. while firms engaged in physical commodities activities employ measures to limit liability – including using a variety of legal structures that attempt to limit liability for catastrophic and environmental events, purchasing insurance, and allocating capital aimed at mitigating operational risk – there are considerable difficulties in estimating bis central bankers ’ speeches the possible damages related to environmental or catastrophic incidents, as evidenced by some well - publicized events in recent years. moreover, just the uncertainty that can come about after a catastrophic event as observers wait to see the ultimate damages could put extraordinary pressure on a financial institution engaged in these

anselmo l s teng : corporate governance in the financial sector welcome speech by mr anselmo l s teng, chairman of the monetary authority of macao, at the fsi - seanza regional seminar on corporate governance for banks, macao, 22 april 2008. * * * distinguished guests, dear delegates, ladies and gentlemen, good morning, i would like to extend my warmest welcome to all of you, on behalf of the monetary authority of macao, for attending the fsi - seanza regional seminar in the next three days. it is our honour that fsi and seanza hold this prestigious seminar in macao, a fascinating city of a unique mix of eastern and western heritage and recreation, featured by various historical and nostalgic constructions as well as gigantic entertainment complexes. i am very pleased to have the privilege to make an opening remark in this occasion and to share with you some of my views on corporate governance in the financial sector. undoubtedly, this is a prominent topic drawing extensive discussion amongst regulators and entrepreneurs in developed and developing countries at all times. to put the discussion in a nutshell, i would like to start with a study of the idea enshrined in the term “ corporate governance ” which is a legacy of our ancient wisdom. the word “ corporate ” comes from latin, meaning the formation of a body, and the word “ governance ” originates from greek, implying to steer a vessel across the sea. these concepts of ancient wisdom is still relevant nowadays, since the protection of shareholders ’ or stakeholders ’ interests as well as the board ’ s role to lead an institution to sail through uncertainties and challenges is the essence of modern corporate governance. in the context of the financial sector, effective corporate governance practices are indispensable to maintaining trust and security and critical to the proper functioning of economic and social system as a whole. poor corporate governance may lead to loss of public confidence in the ability of a financial institution to manage its assets and liabilities in a prudent manner, trigger more serious impacts on the financial sector through contagion effects and may even end in systemic crises. different from other sectors, financial institutions, particularly credit institutions, have “ duties of care ” not only to their shareholders but also their stakeholders, namely, depositors and customers. as the sole regulator of the financial sector of the macao special administrative region, the monetary authority of macao has exerted a lot of efforts to strengthen corporate governance in order to