whether supervision or regulation should play the main role in a particular area. i would like to emphasize the importance of both ; that is, internationally common rules on the one hand, and due respect for the differences among countries and institutions on the other. balance between preventing crisis and containing ripple effects fourth, balance is needed between policies aimed at preventing crisis and those aimed at containing the ripple effects of a crisis that has already occurred. even if all the efforts i have mentioned were made, including macroeconomic policies, regulation, supervision, and selfdiscipline, there will always remain the possibility of financial institution failure. recognizing this harsh reality, we have to redouble our efforts to construct a financial infrastructure that is resilient to shocks. challenges abound in this sphere, but i would like to stress the crucial role of the smooth transfer of liquidity across currencies, time zones, and jurisdictional boundaries. it is the lack of liquidity, rather than the lack of capital, that directly causes failures of financial institutions. therefore, we should endeavor to prevent the crisis contagion triggered by concerns over a lack of liquidity. in this regard, for example, currency swap arrangements and cross - border collateral arrangements could both be effective liquidity supplement tools. enhancing the infrastructure of financial transactions, including the shortening of settlement periods, is also an important issue. 6. concluding remarks as i have argued, striking the right balance in a variety of dimensions is important for realizing financial system stability. i would like to conclude my remarks with a few words mentioning that in order to attain the kinds of balance i have outlined, it is crucial for the relevant organizations and personnel themselves to have a balanced and broad perspective on the issues at hand. the japanese financial crisis was a result of the bursting of the bubble that emerged in the late 1980s. during this bubble era, i was working in the monetary policy area. for several years after the bursting of the bubble, i was involved in the resolution of failing financial institutions and in developing the necessary framework to carry out such resolutions. in the late 1990s, i moved over to work on international financial markets, and in the several years just before and after the asian financial crisis, i was involved in the work carried out by the committee on global financial systems hosted by the bank for international settlements. after that, i returned to the monetary policy area until the mid - 2000s, covering a period identified with a number of keywords, including the bursting of the it

the lessons learned from that crisis were put to good use, even if not perfectly. there were a variety of factors behind the asian financial crisis, and they were combined with each other in a complex way. the key factor that directly precipitated the crisis was the double mismatch of currency and maturity formation in the asset and liability structures of financial institutions, creating a downward feedback loop between currency risk and liquidity risk. with this bitter experience in mind, many asian economies endeavored to increase the robustness of their financial systems. first, financial institutions themselves took measures to improve risk management. mismatches were reduced, although further effort seems necessary. moreover, most asian financial institutions adopted a cautious approach towards the complex securitization products in their investment decisions, as memories of the asian financial crisis were still fresh in their minds. this led to the comparatively lower credit costs this time. second, the asian regulatory and supervisory authorities made efforts to enhance the resilience of their financial systems. they used a variety of measures to enhance the robustness as well as the transparency of the financial systems, including attracting foreign capital and facilitating mergers. moreover, with the enactment of laws and regulations concerning deposit insurance and prompt corrective action, the financial systems were provided with safety - nets to ensure stability in times of crisis. third, following on from the previous point, liquidity backstops were put in place in preparation for turmoil in the financial and foreign exchange markets. central banks have been equipped with market operation tools and standing facilities to ensure liquidity in domestic funding markets. a regional network of currency swap arrangements was expanded under the chiang mai initiatives to ensure liquidity in foreign currency markets. libor - ois spread is the difference between the libor and the overnight index swap rate, which could be considered as an indicator of counterparty credit risk and liquidity premium. enhanced foreign reserves, flexible foreign exchange mechanisms, and stringent fiscal discipline also contributed to reducing concerns over sovereign risk. 4. learning from past crisis experience and yet, even if we learn all the lessons past crises have to teach us, can we guarantee the resilience of the asian financial system in the future as well? i must say, i refrain myself from being optimistic in this respect. i have my doubts because, first, it is difficult for any of us to truly learn from the experience of others. since the bursting of the bubble and the subsequent financial crisis in japan, there has been much discussion of the so