Concluding Remarks

A healthy financial system is a precondition for sustained recovery. Ensuring financial stability requires the redesigning of financial sector policies. For regulatory and supervisory policies, it is necessary to adopt a macroprudential perspective to mitigate systemic risks.

The systemic risks are inherent to the financial systems, specifically, financial products, financial institutions, and markets. Regulators must pay attention to various aspects of the financial system, and act to identify, measure, and mitigate problems to guard against future crises. In this regard, reporting requirements should cover not only financial products but also institutions, funds, and others. Addressing risk in only one area will not ensure the safety of the others. Therefore, direct regulations such as product regulation may not be sufficient and effective. Extensive reporting requirements, especially from those systematically important institutions, should be urgently introduced with close consultation between the regulatory authorities and these financial institutions.

It is worth considering the introduction of complementary measures in addition to the BIS risk-based capital adequacy ratio. Leverage ratios of individual institutions and similar measures at a national level may serve to detect a sign of boom and thus that of the accompanying systemic risk.

For Asian financial authorities, it is important to learn from the risk-management and regulatory failures in the US and Europe. The introduction of Basel II in several Asian countries will enhance the financial resilience to some extent, and furthermore, tools corresponding to macroprudential concerns could be used to reinforce financial stability.

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