be considered within the same international context. of particular interest is the sensitive issue of how to distribute the burdens associated with managing cross - border crises, which will inevitably be brought to the table if proposals for supranational supervision enter the debate. after all, who would like to share crisis management responsibilities without getting any supervisory powers in return? implications for the central banks ’ work on analysing financial stability and systemic risks i will now say a few words about the central banks ’ work on analysing financial stability and systemic risks. given the current conditions one may ask if such analysis is at all meaningful. even if many central banks prior to the crisis pointed at single factors as potential threats to financial system stability, no one really managed to anticipate the situation now at hand. but does this really mean that all work on analysing financial stability and systemic risks is in vain? obviously, my answer to that question is no. i would rather say that the work in this area is more important than ever. however, as we gain new insights from the current crisis, we have to consider how the analysis could be developed. the obvious conclusion is that the analysis has to be broadened in order to cover all the relevant parts of the financial system and how they interact. i will try to give you some of my thoughts on how this can be achieved. first, and perhaps most important, one lesson from the current crisis is that the traditional approach to analysing institutions, markets and infrastructure separately is no longer sufficient. recent experience shows that in the new global financial landscape the importance of markets for system stability has increased dramatically. the financial contagion we have seen is largely a result of certain markets deteriorating and subsequently affecting institutions and markets far from where the problems first emerged. to analyse and understand the interplay between institutions, markets and infrastructure and the potential contagion channels between them is a key factor for successful systemic risk analyses. the banks'increased dependency on financial markets to fund their operations also creates a need to keep an even closer eye on certain markets, and in particular the credit markets, which banks not only use for their funding needs but also to manage risks. the greater market dependency also entails the need to apply a greater international outlook in our analysis. even if a country ’ s financial system is dominated by a few domestic institutions with limited operations abroad, they can evidently still suffer from the breakdown of institutions and markets elsewhere. however, a wider geographical focus is

effective and efficient enforcement. in pursuit of this objective, we have recently issued major regulations covering : • the new financial reporting package ( frp ) ; • the guidelines on supervision by risk ; • the guidelines on information technology ( it ) risk management ; and • the amendments to the fit and proper rule • the prompt corrective action framework. the new frp effectively amends the manual of accounts ( moa ) and revises the reportorial requirements for banks, in accordance with the provisions of the new philippine financial reporting standards ( pfrs ) / philippine accounting standards ( pas ). to the extent possible, we have also integrated into the new frp the requirements of the basel 2 capital adequacy framework. the new frp will greatly promote an enhanced level of financial transparency and also facilitate an enhanced off - site surveillance of banks and other financial institutions under our jurisdiction. banks are constantly exposed to various risks because of the increasingly complex financial setting. rather than constrain product innovation and operational flexibility, we would rather espouse the adoption of appropriate internal risk management mechanisms to ensure that banks and other financial institutions continue to operate in a safe and sound manner. it is for this purpose that we have set out the guidelines on supervision by risks under circular no. 510. mainly, these guidelines specify bsp ’ s expectations on how banks and other financial institutions should manage their risks. these are also designed to provide guidance on how the risk - focused supervision will be applied to these risks. meanwhile, the guidelines on i. t. risk management are intended to communicate to the banking industry bsp ’ s expectations on how technology - related risks should be viewed in the context of bank risk management. we all know how pervasive information technology has become in our banking business. these guidelines will aid in effectively identifying, measuring, monitoring and controlling banks ’ technology risk exposure. building on previous initiatives to raise corporate governance standards, we recently came out with a stricter “ fit and proper rule ” encompassing all directors and senior officers of banks. this is to ensure that officials tasked to manage banks and other financial institutions possess the integrity and competence required for the job. very recently, the monetary board approved the prompt corrective action ( or pca ) framework. this basically communicates to the industry how the bsp will deal with potential problems in bank operations at a very early stage hopefully to forestall more serious problems from arising that would necessitate more drastic and painful measures. the key triggers