Building a resilient financial system

Keynote speech by Jaime Caruana, General Manager of the BIS, at the 2012 ADB Financial Sector Forum on "Enhancing financial stability - issues and challenges" Manila, 7 February 2012.

Abstract 

The uncertain global environment has prompted calls to reconsider or weaken financial reform. I would argue that, on the contrary, the current uncertainty makes it all the more important for us to follow through on what we have set out to do. A number of broad principles guide this work. First, financial stability is about resilience and should be prepared in advance. Second, preserving financial stability involves a wide range of policy areas. Third, a globalised financial system requires global rules. And fourth, we should stay focused on the end result we want to achieve, namely a system characterised by less leverage, better liquidity management, sounder incentives, less moral hazard, stronger oversight, and more transparency. With these broad goals in mind, we can work out appropriate timetables, and we should monitor implementation for unintended consequences. The key challenges in carrying forward this agenda are: first, implementing what has been agreed, especially with regard to bank capital; second, designing the right transition given a still weak recovery; third, completing the regulatory reform agenda, notably in the areas of liquidity standards, resolution regimes, OTC derivatives, and the shadow banking system; and fourth, ensuring sound micro- and macroprudential oversight.