As part of the FSB-led and co-ordinated effort, the central bank Committee on Payment and Settlement Systems and IOSCO are beginning to work on this area of resolution. They must make a clear distinction between measures to procure, on the one hand, Recovery from distress and, on the other hand, Resolution. Orderly resolution is what is needed when a CCP is bankrupt, when we all need somehow to avoid the chaos that follows a standard liquidation of assets and closing out of positions. The issue, always, is where do the losses go? The answer cannot be the taxpayer. In the banking sphere, the answer, broadly, is bond holders and other unsecured, uninsured creditors. In the CCP sphere, it is probably the clearing members, as they would be the principal creditors in an insolvent liquidation. The technical issue is how to achieve that in a way that minimises disruption and value destruction and enables essential CCP services to be maintained. This is a key agenda item going forward. It will involve achieving greater clarity in the related area of the optimal “waterfall” of margin, default fund and CCP owncapital resources in absorbing losses. 4. Margin requirements and macroprudential policy  Earlier this year, US Treasury Secretary Geithner called for the world’s major financial authorities to agree minimum initial margin requirements for uncleared OTC derivative contracts, on the grounds that we must avoid a race to the bottom and incentives that make it attractive to clear bilaterally rather than via a CCP. I agree.
Not only are populations growing older. People are also living for longer. All of these considerations have led to greater attention to retirement planning and to an increase in the size of the pension fund portfolio. Although Asia as a whole lags behind the rest of the world in the development of pension schemes, the numerous pension reforms undertaken to facilitate pension and other retirement schemes have stimulated considerable growth in the size of funds. In some economies, such as Malaysia and Singapore, the pension asset-to-GDP ratio is as high as 50 to 60%. For a number of good reasons, pension funds tend to involve large bond allocations. This has already added to the demand for bonds, and, as with public sector funds, this demand is likely to grow in the future. But, as we are all aware, there is lack of a deep bond market in the emerging Asian economies and therefore much of the increased demand, from both the public and private sectors, has been satisfied by investments in bonds denominated in the major foreign currencies. Indeed the net portfolio outflows from nine emerging markets in Asia (including both public and private sectors) have increased sharply over the past five years - from $ billion in 1998 to $ billion in 2003. Emerging Asia as a whole is now a large net exporter of portfolio capital. The growth in demand for bonds arises from what is surely a positive process - the increase in public and private wealth in our region.