Ultimately, as regulators, we wish neither to stifle innovation nor to undermine financial stability – and it is indeed a very delicate balance to achieve. Similar to when navigating unfamiliar domains, we need to remain agile, adaptive, and proactive – this will ensure reaping the enormous benefits of financial innovations, yet limiting their downside. Let me now turn to the second part of my speech. Regulatory reforms; costly but essential Banking regulation has been another major area witnessing far-reaching reforms. Driven by the experience of global financial crisis, banking regulation, under the able leadership of the Basel Committee, has witnessed a major overhaul. Strenuous efforts have been made to improve resilience of banking systems across the globe. These measures are vitally important, given the increasing uncertainty of when or where the next shock would emanate from. Consider the stress that financial markets had to face in recent years. In 2013, it was the US taper tantrum, in 2014 it was the collapse in oil prices, in 2015 it was rebalancing in China, and this year it was Brexit, just to quote a few examples. These events were markedly different in geographical origin and root causes but were common in rattling the global markets. 3  Against this backdrop, ensuring a resilient banking system capable of withstanding a variety of shocks is no easy task. And these shocks are not only exogenous; the banking system itself is in a state of flux amid evolving risks, in part due to the very financial innovations I just talked about.
Moreover, better supervisory oversight would also give us the agility to mitigate emerging risks before they materialize. Having said that, it must be acknowledged that we can’t regulate every aspect of the banking system. Ultimately, banks should assume prime responsibility for their actions and behaviors. Being dependent on public confidence, banks can ill afford to operate with weak corporate governance 4  or poor risk culture. This necessitates that banks maintain robust corporate governance standards, duly supported by strong internal controls, and prudent risk management. We are fully cognizant that these regulatory measures are costly for banks; nonetheless, costs of any financial crisis, both in financial and social terms, are far more substantial. Therefore, it is only wise and rational to strengthen the capacity of our banks in benign times. I believe our proactive approach has actually paid off, as banks in our region generally entered the low oil price environment from a position of strength. Yet banks’ resilience is not infinite and may come under severe pressure if necessary economic and structural reforms are dropped - or even delayed. Hence, we should not lose sight of the broader economic context in which our financial systems operate. After all, the banking sector is just a component of the overall economic landscape, though a very crucial one. While ensuring banking stability is critical, it is only a necessary condition for overall economic stability – and not a sufficient one.