It was a time when there was an absence of speculators. It was only in 1997-98 when the ringgit and other regional currencies came under speculative attack. The volume of foreign exchange transactions had become massive, far exceeding volume of trade and the normal financial flows. This resulted in exchange rate volatility during the Asian crisis that occurred wave after wave. Regional currencies continued to plummet during this period. After more than a year of this turmoil and uncertainty in the foreign exchange market, Malaysia implemented selective capital controls and de-internationalised the ringgit. This was instrumental in restoring stability in the market. It acted very much like a circuit breaker. Offshore trading of the ringgit, the major source for financing the speculative attacks, was effectively eliminated. Within a year, all the controls that were imposed were removed. More than 10 years later, the ringgit, however, still remains non-internationalised. An important precondition for the internationalisation is the development of a robust foreign exchange market in our financial system. Financial stability The events surrounding the current financial crisis has brought into sharp focus the role of central banks in financial stability. As these events continue to unfold with great uncertainty on the financial markets and broader economy, allow me to reflect on Bank Negara Malaysia's own role in financial stability. In addition to its functions as the lender of last resort, Bank Negara Malaysia has also had the responsibility for the regulation of banking institutions.
They are universal banks; and as such much less vulnerable to funding market conditions. Sound and revolving sources of profits are a vital asset at the current juncture. In this context, French banks can play an active role in the ongoing restructuring of the international financial sector. All in all, beyond sometimes serious tensions and incidents, French banks are now reaping the benefits of the major advances in productivity and innovation they have made over the last two decades. Public policy during the crisis both from a public and a private sector perspective Past months have seen a marked change in public policy. Having been in a first phase geared exclusively to providing liquidity to financial intermediaries, public intervention is since last Fall also aiming to support banks’ financing and own funds. This is a significant shift. Needless to say, restoring liquidity remains a pressing priority. Inter-bank markets have shown gradual signs of improvements. Yet, there is still some way to go. To this end, central banks have mobilised considerable ammunition. A process underway for over a year has culminated in the central banks having adjusted their operational frameworks in various areas. The maturity and currency of their facilities have been expanded. The range of eligible counterparties has been broadened. The tender procedures have been modified with a view to ensure unlimited amounts of central bank money. The list of collateral for refinancing has been widened. As for the Eurosystem, they have been providing liquidity at a fixed rate for unlimited amount.