zeti akhtar aziz : deposit insurance and consumer protection keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the " deposit insurance and consumer protection " 6th international association of deposit insurers ( iadi ) annual conference, kuala lumpur, 31 october 2007. * * * introduction as the international and domestic financial landscape continues to transform, the quest to secure financial stability has become increasingly challenging. regardless of the stage of development, financial systems have continued to be vulnerable to crisis that have resulted in financial disruptions that have had severe economic repercussions. in these circumstances regulators and financial safety net frameworks have been tested to the limit. while the rapid pace of globalisation, the rising internationalisation of the financial system and the advances in technology have brought benefits in terms of increased access to new markets, encouraging financial innovation and increasing consumer choice, it has also brought new risks to the financial system. the intensification of cross - border financing, and the growing complexity of financial structures has resulted in new international inter - linkages which has increased the international interdependence. the transmission of negative shocks in one country to others via the international financial system has demonstrated the potential for financial crises and economic disruptions to spread on a global scale. these concerns have been brought into the forefront recently with the developments in the sub - prime mortgage market in the united states and its contagion effect on financial systems in other parts of the world. indeed, it has shown that in today's globalised and increasingly internationally integrated financial markets, seemingly isolated events in a small segment in one market can have far reaching and vastly magnified implications in other financial markets across the world. this recent episode of financial turmoil has shown that even the more sophisticated and informed investors are pre - disposed to over - react to uncertainties in financial institutions. it also needs to be recognised that the changes in the international environment has also increased the challenges to understanding and managing risks, even for financial institutions and the authorities. these developments have also brought issues of the effectiveness of financial safety nets as well as institutional arrangements for the regulation and supervision of banks, to the forefront. elements of financial safety net it is in this context that the components of the financial safety net, the prudential regulation and supervision, deposit insurance, liquidity support arrangements, crisis management approaches and the consumer protection framework – have continued to evolve over the recent decade. my remarks this morning will consider some of the

on when the adjustment will occur and what will cause it to happen. many argue that u. s. households must raise to a more prudent level a saving rate that has fallen to less than 3 percent of disposable income in recent years. others place the onus of adjustment on foreign economies to boost lackluster domestic demand and increase their purchases of u. s. exports. while some call upon coordinated governmental action to address the pattern of global external imbalances, others place their faith in market mechanisms to do the job. a large part of the reason that people disagree about what will be needed to bring about current account adjustment is that they disagree about what has led the deficit to become so large in the first place. if one believes that the expansion of the current account deficit has been caused by government policies, such as budget deficits, then it is natural to identify a reversal of those policies as the action that will bring about current account adjustment. conversely, if the current account deficit primarily reflects developments in the private sector, it is more likely that the marketplace will be the source of subsequent correction. surprisingly, researchers have made relatively few attempts to assess and compare the full range of explanations that have been proposed for the emergence of the large u. s. external deficit. 1 in my remarks today, i would like to survey some of the factors that have been put forward to explain the deficit. as i do so, i will be referring to several macroeconomic model simulations, implemented by my colleagues on the federal reserve board's staff, that are designed to gauge the impact of these factors on the u. s. external imbalance. the proposed causes of the deficit are by no means mutually exclusive, of course. it is possible and even likely that the deficit is the outcome of several different analyses of the widening of the deficit include, among others, catherine l. mann ( 2002 ), " perspectives on the u. s. current account deficit and sustainability, " journal of economic perspectives, vol. 16 ( summer ), pp. 131 - 52 ; and nouriel roubini and brad setser ( 2004 ), " the u. s. as a net debtor : the sustainability of the us external imbalances, " ( 679 kb pdf ) unpublished paper. developments. i should also note at the outset that the views i will express are my own and do not necessarily reflect those of my colleagues in the federal reserve system. approaches to character