And this supply of services is a necessary condition for a healthy and  BIS central bankers’ speeches  1  successful economy, as demonstrated by the costs imposed by the financial crisis on the public and society at large. For insurance companies, the PRA will have the second objective of contributing to securing an appropriate degree of protection for those policyholders. Why do we need a second objective for insurance? For me, it rightly emphasises that in taking out some forms of insurance policies, the public can become locked into very long-term contracts, much longer often than is the case in banking with deposit contracts. Bearing this in mind, the public interest I think justifies a second objective for insurance, which is more directly targeted at the situation of individual policyholders. In contrast as bank deposits are redeemable on demand at par value, and as banks lend the deposits at longer maturities, so they are inherently fragile and vulnerable to contagion, so protecting the system protects depositors. There are a number of important points in this description of the PRA’s objectives. First, the emphasis on economic well-being as an ultimate goal aligns the supervision of banks and insurers more closely to the field of macroeconomic policy. This is in line with the definition of “financial stability” as the continuity of supply of critical financial services which are important to the functioning of the economy. Three services stand out here: the provision of payment services including access to funds; credit extension; and, risk transfer.
Zeti Akhtar Aziz: Innovative financing for transformation Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Langkawi International Dialogue 2011: Innovative Financing for Transformation, Putrajaya, 19 June 2011. *  *  *  The world is transforming. Our motivation for accelerating our own pace of transformation is to ensure that we will be able to effectively participate in this new economic and financial environment, and in the process, maximize our potential performance. Central to this is having a well functioning financial system and the right financial policies. The recent financial crisis in the developed world has shown that when things have gone wrong in the financial system, the consequences have been catastrophic. Instead of creating wealth – it destroys wealth, instead of generating employment – it results in job losses, instead of facilitating economic progress – it derails growth and development. It is my great honour and pleasure to speak at this 2011 Langkawi International Dialogue on Innovative Financing for Transformation. The overarching objectives of economic transformation is surely to generate sustainable and balanced growth, to improve living standards, to create employment opportunities and to achieve a more inclusive development. This decade has however seen how innovative financing in several of the developed economies have fuelled excessive levels of leverage that have resulted in deeply indebted private and public sectors, which in turn have become highly destabilizing to their financial systems and to their economies.