pose significant risks at the global level : an uneven recovery, diverging economic policies, protracted low levels of interest rates, increased sovereign debts, large imbalances in international payments, and pressures on exchange rates. correspondingly, we should continue to improve international cooperation. there are three main priority areas : – first we need to complete the reform of the international financial system ; – second, we have to develop a better system of macroprudential surveillance, refining the authorities ’ ability to identify systemic risk and, especially, to act upon early warnings ; – third, crucially, we need to establish a coherent set of norms, rules of conduct and formal institutions shaping coordination of national economic policies. we have come a long way towards strengthening the financial system since the crisis began. my own experience in the financial stability board is that it is certainly possible – at times bis central bankers ’ speeches even surprisingly easy – to come to a shared diagnosis and devise a common response even to extremely complex problems, when there is a willingness to do so. the new basel iii regulatory framework is now in place, with new capital and liquidity requirements and limits to financial leverage. its gradual phasing - in will prevent it from hampering the economic recovery. the over - the - counter derivatives markets will have a sounder and more transparent basis. we have identified many of the perverse incentives that encouraged excessive risk taking – in banks ’ executive compensation systems, in the role of credit rating agencies and in accounting rules – and we have begun to rectify them. the activity of the fsb is now concentrating – in accordance with the mandate given by the g20 – on two crucial priorities : tackling the moral hazard problem posed by systemically important institutions ( sifis ) and extending the rules to the “ shadow banking system ”. the reform of the financial system is however not complete. there is a danger that, as the world economic recovery advances, the sense of urgency – a major propeller so far – might now weaken. it would be unforgivable not to keep the momentum in international cooperation and miss the occasion to decisively strengthen the international financial system. there are two obvious compelling reasons for this. first, neither our public finances nor our citizens would be ready to withstand a new crisis. second, in a global system where external imbalances remain large and capital flows may be subject to sudden reversals, it is essential to rely on a financial system that is at the same time

banking products and strengthen our banks. we have introduced the east african payment system ( eaps ) to reduce the cost of doing business. we are now working on convertibility of the eac currencies – mous have been signed. these initiatives will bring the eac closer together. the central banks in eac believe that these are important quick wins for the eac regional integration process. ladies and gentlemen : for the continued regionalisation of the banking sector operations to generate the desired impact, a concerted effort to up - scale the skills and competences of our human resources as a region is necessary. in this regard, the kenya institute of bankers ( kib ) and other capacity building institutions should rise to the occasion not only to modernise their capacity building initiatives but to develop programmes that cater to the capacity needs of the entire eac region and beyond. as the banking sector players establish presence across borders, kib should explore avenues of satisfying the emerging human resource needs in the countries where the banks are expanding to. i am aware that the annual east african banking school organised by the eac banking institutes is designed with the regional banking sectors in mind. however the on - going integration calls for more tailored capacity building initiatives. in this regard, kib and counterpart banking institutes should re - examine their strategies to ensure that the envisaged integrated financial market is not derailed by inadequate human resource capacity. let me now turn to some interesting and current outcomes and landmark achievements for the kenyan economy, that will continue to enhance and consolidate our financial sector performance : first, the success of the sovereign bond debut for kenya that was over - subscribed by over 500 %. the government took us $ 2. 0 billion against us $ 8. 8 billion offered at an average interest rate of 6. 6 %. this success has several implications : 1. the sovereign bond brings into the market an asset that is risk free and will form a benchmark of pricing risk free assets in kenya. since the interest on the sovereign bond is fairly competitive, it will lead to a re - pricing downwards of domestic financial assets – so domestic interest rates will decline. bis central bankers ’ speeches 2. the sovereign bond is already trading in the irish securities exchange – this will improve kenya ’ s standing and rating in the international capital markets. 3. the government, due to this success of entry into the international capital market, will reduce expensive domestic borrowing. this will of necessity release some liquidity into the domestic market.