The 1988 Accord became outdated to a large extent because it was a relatively simple and static document: its one-size-fits-all approach to capital regulation represented an important advance as a universally accepted standard, but it did not provide a means to recognise more advanced risk measurement techniques. It quickly fell behind as the pace of innovation in technology, financial products, and markets accelerated. In response, the Committee designed the New Accord to be a more flexible document and one that would be more welcoming of improvements in risk management techniques. Its evolutionary approaches to credit risk and to operational risk, for example, give banks a range of options to choose from and create explicit incentives for banks to strive to adopt the most advanced approaches. The New Accord still has its limits, however. Members of the IIF and others have cited as an example the failure to recognise use of full credit risk models, which would adjust a bank’s capital requirements in accordance with the benefits of diversification in its balance sheet. As you know, the Committee evaluated proposals that would have allowed advanced banks to estimate the degree to which their assets might behave similarly or default together. For the time being, we have decided instead to establish standard estimates of diversification that banks would apply.
Muhammad bin Ibrahim: The way forward for development financial institutions Opening address by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Global Symposium on Development Financial Institutions “The Way Forward for Development Financial Institutions”, Kuala Lumpur, 19 September 2017. * * * Selamat datang” and a very warm welcome. Thank you for the opportunity to speak today at this important gathering to discuss the way forward for development financial institutions. In 2012, the music video “Gangnam Style” by Korean pop artist PSY took the world by storm. Being the first video to record more than 1 billion YouTube views, its infectious dance moves have become universally recognised, transcending borders and social status. The video marked the beginning of the rise of the Korean cultural phenomenon known as Korean Wave or “Hallyu”, a new growth area for its economy. Today, the export of Korean culture content, including films and music, is estimated at USD83.2 billion. In under a decade, the sector grew to contribute 0.7% to South Korea’s GDP in 2011, supported over 67,000 jobs and generated USD3.3 billion in tax revenues. This extraordinary rise of the Korean Wave can be attributed to the growth of investment in the creative industry. The industry was boosted by the government’s strategy to prioritise the sector as an engine of growth after the Asian Financial Crisis. The Korean government had earmarked 1% of the national budget for development financial institutions to kickstart the sector.