The majority of global consumer transactions still take place through cash. As previous Currency Conferences have affirmed, we expect physical cash to remain necessary and relevant. Digital media has significantly transformed the way we experience the world. However, it has not brought us to the closing pages for physical media – including notes and coins. This may appear strange, if one considers the fact that much of our communication, planning and transportation revolve around the internet. As a recent McKinsey report puts it, mobile devices have become the “digital container” of our daily lives. This marks a profound cultural shift. The smartphone is fast becoming an extension of ourselves. Indeed, this digitalisation is altering the way payments are being made. We are not only spending more time online, we are spending more money through online channels. Our familiarity with and dependence on mobile devices is unprecedented. I believe that this attachment has made us increasingly comfortable with digital payments. They now appear more intuitive, more reliable and more convenient than ever before. This trend is evident in the findings of a recent international survey by ING. Most of the respondents are using less cash now compared to a year ago. A third of Europeans surveyed were even willing to go completely cashless if it were possible. We have seen a similar shift here in Malaysia. When internet banking was first introduced in Malaysia back in 2000, most people were sceptical about its safety and reluctant to learn how to use it.
•  But there are many others in this room who are better placed to judge that. Old wine in new but bigger bottles: macroprudential regulation Even as we re-discover the virtues of microprudential policies, we realise they may not be sufficient in the face of overwhelming exuberance and risk-taking. •  This is where macroprudential policy comes in. •  Macroprudential policy can be more effective than monetary policy in “targeting the cracks” where specific vulnerabilities are concentrated. Macroprudential policy is related to but distinct from microprudential policy. •  Some have called macroprudential policy “old wine in new bottles”. Yes and no. •  Many of the tools are indeed the same: loan-to-value ratios, debt-to-income ratios, debt service ratios, and so on. But there is a difference. When these limits are used for macroprudential purposes, the scope and calibration are much larger. For example: •  A loan-to-value ratio of 80% for property loans, applied through the cycles, as we have in Singapore, is a microprudential tool. •  But when we tightened the loan-to-value ratio to as low as 20% for a third property loan, as we did a couple of years ago, it became a macroprudential tool. •  Macroprudential policy may well be old wine, but it is in much bigger bottles! Macroprudential policy can also come in several different bottles. •  Instead of relying on a single tool (e.g. the interest rate for monetary policy), macroprudential policy is often multi-pronged.