Maintaining ecological sustainability requires global initiatives, advances in technology, and changes in policies and consumption patterns. To its credit, China is serious over environmental issues. The recent 17th CCP Congress reaffirms Chinese leaders’ pursuit of “harmonious development”. It also explains why Premier Wen Jiabao agreed readily to my proposal that Singapore and China jointly build an eco-city in China – a city where people, economic activities and the environment co-exist in harmony. We are in the process of choosing a non-agricultural site which lacks water, so that the ecocity there could be a model for China’s new cities. Priorities of ASEAN Southeast Asia is an important piece of the regional structure and will play its part. Later this month, the ASEAN and East Asia Summits will be held in Singapore. Singapore, as ASEAN Chair, has identified climate change and the environment as key agenda items. This will sustain the momentum of discussions on such issues until the December UN Framework Convention on Climate Change Meeting in Bali. In practical terms, Singapore and Malaysia are working with neighbouring Indonesian provinces to tackle peat land fires and develop sustainable land-clearing practices. While Myanmar will no doubt grab media attention at the ASEAN Summit, it will not be the most important story for ASEAN. Of greater importance is the fact that ASEAN leaders will sign a politically-binding declaration to establish an ASEAN Economic Community by 2015. ASEAN will evolve into a single market and production base with free flow of goods, services, investment and skilled labour.
Most importantly, we will not accept empty shell companies. All entities in the euro area must have adequate local risk management, sufficient local staff and operational independence. All that should be self-evident. Banks which seek to permanently book all exposures back-to-back with another entity in London should change their plans. And so should banks that plan to book all exposures with a euro area entity while having their risk management somewhere else. We are aware that it is a burden for UK banks to apply for a new licence in the EU. With a view to internal models, we would aim to be accommodating regarding the timing. There will be a transitional period in which new euro area entities might use internal models that have not yet been approved by the ECB. But of course, there are conditions attached. First, the relevant models must have been approved by the UK’s Prudential Regulation Authority. We would also reflect on any comments on the quality of the models from our UK colleagues. Second, the banks must have applied for internal model approval in the euro area. The transitional period will cease as soon as we have approved or rejected the bank’s model application. Ladies and gentlemen, sound banks are at the heart of a strong economy. Banks therefore should note Walter Bagehot’s words and remain cautious. It is our job as supervisors to help them do so and steer clear of risky adventures. Thank you for your attention. 2/2  BIS central bankers' speeches