mr macfarlane : opening address to the euromoney australasian capital markets forum opening address by mr i j macfarlane, governor of the reserve bank of australia, to the euromoney australasian capital markets forum, held in sydney on 14 march 2000. * * * i would like to start by thanking mr brady for his introductory remarks, and to say that, in our view, euromoney made a very sensible choice in scheduling a capital markets forum in sydney. it recognises the significance and growth potential of our capital markets, and the generally improved prospects for this region. i see a very impressive list of speakers and participants before me and i am sure there will be a lot of fruitful discussion over the next two days. the timing of the conference is interesting in that it comes at a time when we can safely say that the asian crisis is behind us and that, with a couple of exceptions, the outlook for this region is good. perhaps it was australia ’ s success in withstanding the contractionary effects of this crisis that encouraged euromoney to hold its conference here at this time. whether that is the case or not, i would like to take the asian crisis and its spillover to other emerging markets as the starting point for my comments this morning. i do not wish to go over the macro - economic issues because i have already done this before. i would instead like to ask what did we learn from this crisis that was of immediate relevance to capital markets? what are the implications for developed economies such as australia? my answer to the first question is that we learnt that, for a country to play in the international financial market place, it needs a very sound financial infrastructure. i do not wish to suggest that it was the lack of this which caused the asian crisis ( the cause lay elsewhere ), but it was this deficiency which made the crisis so deep when it occurred. by financial infrastructure, i mean : • the body of commercial law which covers everything from the concept of limited liability to bankruptcy provisions ; • the conditions under which entities can issue debt and equity ; • the body of competition law, trade practices law and securities regulation which ensures arm ’ s length dealing and limits related party transactions ; • the supervision of the banking system, including regulation of near banks such as finance companies and merchant banks ; • the provision of a safe payments system ; • the application of sound accounting standards ; • the existence of a court system which is capable of timely resolution of disputes

banking authority ( eba ) was delegated to issue secondary regulation. the guidance on cyber resilience for financial market infrastructures was published by cpmi - iosco in 2016. to ensure its harmonized implementation within the euro area, the eurosystem has delivered a cyber resilience strategy that national supervisors must adopt to enhance the cyber resilience framework of financial institutions. however, regulation alone is not sufficient to protect the financial system from cyber risks. indeed, excessive reliance on regulation may even have undesirable side effects owing to the complex interactions between different regulatory levels, such as domestic versus international legislation or economy - wide versus sector - specific rules. hence, other forms of intervention are necessary, such as cooperation. the second pillar : cooperation owing to the existence of externalities, individual intermediaries may lack sufficient incentive to contribute to the supply of a common good – cyber security – that would generate benefits for their direct competitors as well. they may be tempted, therefore, to free ride on the action of other companies and to under - invest in security - enhancing projects. in this situation, central banks, as third parties entrusted with preserving financial stability, may act as a catalyst to stimulate cooperation, centralized cyber threat intelligence and information sharing initiatives. 3 at european level, the recent establishment of the european cyber resilience board ( ecrb ) under the eurosystem cyber resilience strategy is a valuable example of virtuous cooperation among public authorities, financial market infrastructures and critical service providers to enhance the cyber resilience of the european financial ecosystem. financial authorities may also leverage such cooperative initiatives to promote effective practices and tools for cyber risk assessment, including simulations and tests, which are difficult for individual firms to implement in isolation. this is a new paradigm, in which authorities and regulated entities work closely together, complementing compliance with a collaborative approach. this allows the authorities to gain a deep understanding of the level of cyber resilience achieved and of any additional initiatives required. the third pillar : promoting risk awareness the third pillar of action focuses on the human factor, as in cyber security people are still the weakest link. for example, the spread of cyber extortion ( ransomware ) – which is becoming one of the major threats to digital businesses – can be attributed to several factors. some are technical, 4 but the threat intelligence may support financial institutions in taking the right decisions to prevent cyber attacks, effectively protect their critical assets and respond appropriately in the event of