otc derivatives. the culmination of the new 2002 isda agreement, 10 years after its predecessor, comes in the wake of many financial crises. legal documentation of derivative transactions has a role in mitigating risks for banks and businesses. the world has changed considerably in this recent 10 years - financial liberalization driven by rapid advances in information technology is altering the financial landscape at an unprecedented pace. the legal and regulatory infrastructure must keep pace. we must continuously learn, un - learn and re - learn. the acquisition and application of knowledge must be a deliberate strategy and activity in pursuing the path of excellence. apart from the developments in the nature of financial risk due to globalization and regional integration, the ramifications of the basle ii capital accord, and the potential for developments in islamic derivative instruments, i am aware that there are many other highly technical matters that need to be appreciated and understood. i will leave this to the experts who have given their valuable time to share their knowledge with us today at this banking and law school event. i wish you an engaging learning experience. this is also a rare opportunity to develop your networks, share your knowledge with your peers and reflect upon how this learning experience will make a difference in your professional career.

and 18 trillion us dollars classified as others. the fact that growth in financial derivatives has far surpassed the growth in the underlying real economies that generated the original transactions and risks for diversification is a matter of concern to regulators. it seems that speculators appear to have embraced derivatives as another form of investment for short - term capital gains. if financial derivatives take on a life of their own due to excessive speculative activity, the utility for risk diversification may prove illusory from a systemic point of view because the new risks introduced by derivatives may well overshadow the risks posed to the financial system by the underlying more risky financial assets. on a preemptive note, in response to a series of derivative debacles that was sparked off by the barings crisis in 1994, bank negara malaysia has taken steps to enhance prudential regulations on the derivatives business of banking institutions. in 1996, the guideline on minimum standards on risk management practices for derivatives was issued to provide a framework that outlines the minimum risk management standards for the derivatives business of banking institutions. it requires banks to ensure that risk management controls and procedures are in place before engaging in derivatives business. the guidelines also ensure that derivatives can be offered to customers for hedging purposes only. in may 2003, as a step towards a more liberalized financial market, banking institutions are allowed to embed derivatives into investment instruments to enhance yields. the investment has to be principal protected, and may be offered to high net worth or corporate clients and for a minimum transaction amount of one million ringgit. as part of the prudential requirements, no leveraging is allowed on the structure. gradual liberalization allows the banking industry and the regulator to work in a collaborative manner in developing an innovative yet stable financial system. in the context of the significant growth in otc derivatives, both in the domestic market as well as the global market, there is therefore an important need for prudential management in derivatives since speculation would itself introduce risks into otc derivatives market and could deter the principal objectives of risk diversification and risk management. allow me now to share 3 points concerning risk management opportunities in the wake of developments emerging in the international financial landscape. the first point is that regional integration offers increased opportunities for otc financial derivatives in managing financial risks. the second point is that the new basle ii capital accord must be studied carefully to ensure that the portfolio of derivative products is profitable and innovative while remaining in compliance with the riskweighted capital requirements