9  For example, in his 2009 letter to the Chancellor requesting the MPC be able to use the Asset Purchase Facility for monetary policy purposes, the then Governor, Mervyn King said “At some future date, I would expect that the MPC would wish to exit from the strategy of buying assets and would wish to reduce the amount of assets held under the Asset Purchase Facility.”  10  See for example Alesina and Summers (1993), Klomp and De Haan (2009) and King (2013). BIS central bankers’ speeches  5  Conclusion Let me sum up. We are still learning how the post-crisis economy behaves, and some relationships in the data have proven slow to reassert themselves or may have changed. The recent plateau in wage growth despite the ongoing recovery is one example, and I will wait until I am convinced that wage growth will be sustained at a level consistent with inflation returning to target before voting for an increase in Bank Rate. In this sense, I will proceed with caution. But once I am convinced, absent further shocks, I can see Bank Rate rising more quickly than the path implied by the market curve at the time of the last Inflation Report. That is not to say I don’t understand the shape of the yield curve – market participants must consider all of the possible outcomes when making their decisions, and the yield curve could be weighed down by worries about the world.
While compliance will remain important, the nature and intensity of supervisory relations with financial institutions are already seeing a more prominent shift towards more open and engaging interactions that allow both supervisors and financial institutions to develop a more complete understanding of risks confronting the institutions and industry as a whole. This also supports current efforts to strengthen the macro prudential orientation to risk management, both at the system and institution level whereby the assessment of institutional risks is complemented by considerations of macroeconomic developments and collective market behaviors that can have a significant impact on financial stability. The reform measures to enhance the resilience of financial institutions and the supervisory capabilities to identify and assess risks at the macro level are also being reinforced with efforts to strengthen the caliber of the boards and senior management of the financial institutions. In Malaysia, our commitment towards enhancing the performance of boards of financial institution has not only been through the issuance of supervisory guidance, but also with the introduction of a rigorous Education Programme for Directors that was launched in 2008. Beginning this year, this programme is open to directors of financial institutions outside Malaysia. In drawing from the many lessons from the Asian financial crisis and this recent global financial crisis, nurturing of a strong risk culture and ethical workforce within the financial industry is absolutely fundamental to our efforts to promote financial stability and the need for this to start with the board and management of financial institutions.