The structure and operation of the financial system have undergone marked changes in the past couple of decades, driven by dramatic improvements in technology, rapid product innovation, integration of financial systems, competition in financial services, and policy, regulatory, and trade reforms. These developments have led to a dynamic, sophisticated, and global financial services arena which fostered economic growth. Yet, the financial and economic crisis has brought to the fore many inappropriate or ill-adapted elements of our approach to financial regulation.

The crisis has forced us to think hard about the financial system: how it works, the objectives it should fulfil, and the tools and policies to help shape it.

The Policy Framework for Effective and Efficient Financial Regulation, supported by General Guidance and a High-Level Checklist, is a tool that can support ongoing efforts by policymakers, regulators, and supervisors to achieve a stronger, more resilient financial system. It is not meant to substitute for the more focused, micro-prudential principles and guidelines of international standard-setting bodies. But it can guide our strategic thinking and promote governmental leadership and action so that the financial system can play its vital role in the functioning of the economy, both domestically as well as globally. The Policy Framework, including the General Guidance and High-Level Checklist, is the product of work by the Committee on Financial Markets and the Insurance and Private Pensions Committee, and was the subject of a broad public consultation. The Policy Framework challenges policy makers to think about the fundamentals of financial regulation in a globalised financial system. It also invites them to improve their understanding of the financial system and work in close cooperation with other countries to develop proper tools and instruments so that public policy objectives are met. I hope that policymakers will use the Policy Framework in setting national policy and in working with international partners.