It made the countries in the region less vulnerable to shocks caused by sudden stops in capital inflows by committing parent banks to maintain their exposure to these countries. However, a number of challenges lie ahead, including the financial stability risks stemming form lending in foreign currencies and the substantial build-up of currency mismatches in private sector balance sheets.
2  BIS central bankers’ speeches  Moreover, the Basel III framework, which has recently been released, sets stricter capital and liquidity rules than those that presently exist. The new rules will encourage banks to rely more on deposit-taking, thereby rendering the banking industry of the region more stable.