The developments I have just described offer some insights into how the future steady state risk management framework might look. At the moment, I see four key features: First, while the temporary collateral framework has successfully eased potential collateral shortages, it could be argued that it should not become part of the regular framework. As liquidity demand declines, there will also be less need for an expanded set of eligible collateral. Whether some temporary measures might be transformed into a state-contingent framework, ready to be activated again in the future if circumstances so require, is an open question. As experience shows, each crisis needs a tailored response. Second, we will need to keep the flexibility to adjust the collateral framework to financial innovations, especially when it comes to complex new financial products. The new “simple, transparent and standardised” securitisation regulation is a case in point. It will allow us to better assess the collateral we accept. In a similar way, we will need to forcefully deal with new types of securities, such as conditional pass-through covered bonds, whose risks may not yet have been fully appreciated. 3/4  BIS central bankers' speeches  Third, we will have to retain the risk control frameworks for the asset purchase programmes beyond the horizon of our net asset purchases. As long as we keep outright portfolios on our balance sheet, the reasons behind the risk control measures, including eligibility criteria, purchase limits, benchmarks ensuring diversification and the different risk-sharing agreements, will continue to apply.
BIS estimates that the average daily MYR forwards traded offshore is 4 times the amount onshore. This should not be the case as MYR is not an internationalized currency, and that all forwards should be backed by firm trade transactions. Given the sizeable volume and the opaque nature of such markets, I cannot help but ask: “What are we missing here? Who are the players in the ND markets? Are they hedging or speculating? “ Is it the lack of capacity of our local players to serve certain players? Or is it that the local regulatory and operating environment needs to be adjusted? These gaps should be identified and remedies formulated as the offshore market represents a loss of business opportunity for the onshore players. Fundamentally since the transactions are related to Ringgit, its activities should be captured onshore and transacted through the onshore market players. Ringgit exchange rate should be determined by onshore players, reflecting the underlying demand and supply of foreign currencies in the economy. It should not be dictated by any market other than Kuala Lumpur. Expectation and direction going forward As 2015 draws to a close, let us not allow the increasing challenges to stop us from advancing forward. Volatility is not likely to go away any time soon. It would be the norm. A new normal. Let us persevere, learn from the past and as a group forge ahead into the future. It is appropriate to have a retrospective here.