I then discuss the approach by the Reserve Bank to regulation and its interface with the new Basel standards and conclude by highlighting some related issues. Rationale of banking regulation Let me begin by asking the question: Why do we need to regulate the financial system, particularly banks? This is because banks have a critical role in modern market economies.
Despite some instability observed in the JGB market soon after the introduction of QQE last April, the market gradually regained stability as the Bank implemented detailed money market operation measures while maintaining a close dialogue with market participants. QQE has thus been exerting its intended effects, with favorable developments spreading to economic activity and financial markets.