In addition, the implementation of NSFR increases the costs of infrastructure financing as it asks these types of assets to be covered with longer term and more expensive funding. Albeit there are many other angles within the new regulatory reform which have been discussed in light of their consequences to the EE’s (for instance policy measures for dealing with systemically important banks, the impact of some other national and regional reforms 1, the two above elaborated dimensions of the Basel III, seem to depict, or to be a good represent of what the main impact boils down to. Rising cost of finance, restrained credit availability and more conservative treatment of some of the forms of financing, crucial for the growth of EE’s are the most important consequences being discussed, which should be seriously addressed. As for the quantitative impact studies, they do indicate a growth impact of the new regulatory changes, though with varying intensity. While BIS Macroeconomic Assessment Group finds rather modes effect, assessment of the International Institute of Finance and some assessments of the banking industry point to a non-negligible growth effects. A BBVA 2 research, conducted in early 2011 estimates the impact of higher liquidity and capital requirement on the quantity and price of credit, and hence its impact on the GDP per capita. The estimation results point to a larger effect of the regulatory changes on the GDP per capita of the emerging markets, compared to the one in the more advanced countries.
This has resulted in the intensification of our supervision on areas or businesses that are more prone to ML/TF risks, or where controls have been found to be lacking from past inspections. 17. We have organised and will organise more industry engagements to share supervisory findings on common lapses and good practices at the end of each series of inspections. This is intended to help level up controls over time. 2/5  BIS central bankers' speeches  18. Our inspections go beyond rules-based compliance. We focus on whether financial institutions demonstrate a good understanding of risks, and a good risk culture within the organisations. We much prefer that FIs adopt a proactive approach in meeting their regulatory obligations than a passive rule-based attitude. Let me elaborate on this. 19. One area relates to governance. You are all familiar with the common thinking of having three lines of defence. Recently, there are suggestions to augment this with a “four lines of defence” model for better governance in financial institutions. The first line involves frontline and management controls within business units; then compliance and risk management functions as the second line; and the audit function as the third line. A newer fourth line involves interactions of the FI with its external auditors and regulators. An FI’s senior management and board should monitor and be satisfied that these lines are effective. Senior managers should never “look the other way” on suspicious transactions, even if they involve major clients who are significant revenue sources.