capital positions were evaluated under a hypothetical stress scenario that involved a deep recession in the united states ( with unemployment reaching 13 percent ) and a notable decline in activity abroad, combined with sharp decreases in both domestic and global asset prices. this exercise was designed to capture both the direct and indirect exposures and vulnerabilities of u. s. financial institutions to the economic and financial stresses that might arise from a severe crisis in europe. the results show that a significant majority of the largest u. s. banks would continue to meet supervisory expectations for capital adequacy despite large projected losses in an extremely adverse hypothetical scenario. conclusion the recent reduction in financial stresses in europe is a welcome development for the united states, given the important trade and financial linkages connecting our economies. however, europe ’ s financial and economic situation remains difficult, and it is critical that the european leaders follow through on their policy commitments to ensure a lasting stabilization. i believe that our european counterparts understand the challenges and risks they face and are committed to take the necessary steps to address those issues. for our part, the federal reserve will continue to monitor the situation closely, work with our financial institutions and foreign counterparts to enhance the resilience of our financial see board of governors of the federal reserve system ( 2012 ), “ federal reserve announces summary results of latest round of bank stress tests, ” press release, march 13. bis central bankers ’ speeches system, and be ready to use our tools to help stabilize u. s. markets should the situation require such action. thank you. i would be pleased to respond to your questions. bis central bankers ’ speeches

promoting commercially viable microfinance ventures. in this connection, greater flexibility has been provided for foreign banks to enhance their presence in non - urban areas. given the objectives of financial inclusion, it is hoped that foreign banks support this initiative given the flexibility that is being accorded to widen the outreach to segments of the economy which are currently underserved. also embedded within the financial inclusion agenda is the responsibility that banking institutions have towards their customers, and to ensure that adequate information is provided to consumers and investors to make informed judgments. in the area of product development, both the interest of consumers and businesses will be taken into account. financial institutions that demonstrate their ability to act responsibly can look forward to greater business flexibility to innovate. financial institutions that uphold the necessary principles in their business strategies stand to reap long - term gains from enhanced franchise value, a strong reputation and positive association with socially responsible values that will engender public trust and confidence. the third area relates to the need for banking institutions to enlarge their sphere of influence going forward given the changing environment. banks will increasingly be exposed to external developments and the forces of market discipline. there are several particular areas in which banking institutions can take strategic positions to influence such developments. first is to leverage on the “ network economy ” through strategic alliances. with global integration deepening further at the same time that competitive forces are exerting pressures on margins, the way forward would be to build on strategic alliances to increase capacity and expand reach, while containing costs. strategic alliances with third parties, including those within and outside malaysia, provides efficient opportunities to capitalize on the strengths of each partner and in the process promote development, the transfer of skills and improvement of best practices and pave the way for successful cross - border ventures. the second relates to the area of international standard setting. with the gaining momentum of international standards in such important and pervasive areas such as capital adequacy standards, financial reporting and cross - border activities, it is important for financial institutions to participate more constructively in the standard setting process together with the regulatory community in order for such developments to take into account domestic circumstances and risks. the third is in the area of ongoing negotiations on trade agreements. banking institutions need to follow these developments and negotiations closely to consider implications it would have to their organisations and future business strategies. the last area of influence relates to communication strategies. with increasing market discipline, effective communications has become more critical. institutions will need