Thus, I would like to use this opportunity today to highlight key areas which require attention and leadership of top policy makers at supervisory agencies as well as banks, to ensure not only soundness of individual banks, but also guard against systemic risk as a whole. Let me now turn to the first part of my talk: Key Features of New Paradigm What is driving the changing global financial landscape? The failure of several financial giants, and with many still in retrenchment, led to market space being taken up by surviving global banks, some have become state-owned via rescue programme. Their systemic importance has risen further along with their market power, and regulation must rise up to the challenge. The interdependence of the financial sustainability of these financial giants and sovereign risks have become increasingly linked, while perception of state guaranty of such institutions may distort local or even global markets, creating un-level playing-field. The demand for accountability for public bail-out money puts pressure on managing such banks, which have now become “public institutions”. Thus, the intervening authorities face a strong risk of having to micro-manage the institutions, and with this the associated risks, not least reputational and legal. Timely exit is important for the reason cited. Exit policy however could also be complicated, for example if recovery value of bailed-out fund is under pressure from weak market conditions. Most importantly, it is important to observe that, the precedence set by the actions regulators took in such intervention could have a long-term implication.
The principle of so-called “insignificant host”, as viewed from home supervisor’s perspective, may contradict with the agreed principle of the need for the host to oversee systemically important institutions. Thus, a host supervisor should receive better information and even be included in supervisory colleges by home supervisor, if the global bank branch operations are systemically important to the host economy. Colleagues, ladies and gentlemen, This is a challenging time, with new paradigm, and therefore leadership by all of us is required to ensure that we set a balanced agenda in our reforms going forward. I believe SEANZA forum would become all the more valuable in the future in cementing our network and friendship. Thank you for your attention. 6  BIS Review 146/2009