Risk Management Presentation August 27 2012

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International Association of Risk and ComplianceProfessionals (IARCP)

1200 G Street NW Suite 800 Washington, DC 20005-6705 USATel: 202-449-9750www.risk-compliance-association.com

Top 10 risk and compliance management related news storiesand world events that (for better or for worse) shaped the week's

agenda, and what is next

George LekatisPresident of the IARCP

Dear Member,

As mandated by the Dodd-Frank Act, the Office of CreditRatings("OCR") was created in support of the Commission's mission toprotect investors, facilitate capital formation, and maintain fair, orderly,and efficient markets.

They have an interesting web site:

Learn more at Number 1 below.

Welcome to the Top 10 list.

International Association of Risk and Compliance Professionals (IARCP)www.risk-compliance-association.com
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The Office of Credit Ratings

In July 2010, Congress passed the Dodd-FrankWall Street Reform and Consumer ProtectionAct ("Dodd-Frank Act"), which, among otherthings, amended Section 15E of the SecuritiesExchange Act of 1934 (the "Exchange Act") toenhance the regulation, accountability andtransparency of"nationally recognizedstatistical rating organizations" or "NRSROs".

Thematic Peer Review of ResolutionRegimes, Questionnaire

The global financial crisis demonstrated theurgent need to improve resolution regimes soas to enable authorities to resolve failing financial institutions quicklywithout destabilising the financial system or exposing taxpayers to therisk of loss from solvency support.

Learning about compliance and opportunitiesOffice of Compliance (OOC)

The Office of Compliance (OOC) is anindependent, non-partisan agency establishedto administer and enforce the CongressionalAccountability Act (CAA).

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Economic and FinancialDevelopments in Malaysia

Isle of ManCost of Compliance for smallerlicenceholders

The main change is that licenceholders withan annual turnover of up to 250,000 may

apply for an exception from audit of their financial statements.

The Central Bank of the BahamasInterest Rate Risk

Short-Selling Bans Failed toPrevent U.S. Stock Price Declines

How liquid are U.S. life insuranceliabilities?



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ESMA publishes summary ofresponses to its consultation on

materiality in financial reporting

Interesting Speech

Daniel M. Sibears , ExecutiveVice President, MemberRegulation Programs

Before the Committee on Banking, H ousing, and Urban AffairsUnited States Senate

Global Risks 2012, Seventh Edition

Economic imbalances and social inequality riskreversing the gains of globalization, warns theWorld Economic Forum in its report GlobalRisks 2012.

These are the findings of a survey of 469 expertsand industry leaders, indicating a shift ofconcern from environmental risks to socioeconomic risks compared to ayear ago.



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NUMBER 1

The Office of Credit Ratings

In July 2010, Congress passed the Dodd-Frank

Wall Street Reform and Consumer ProtectionAct ("Dodd-Frank Act"), which, among otherthings, amended Section 15E of the SecuritiesExchange Act of 1934 (the "Exchange Act") toenhance the regulation, accountability andtransparency of "nationally recognizedstatistical rating organizations" or "NRSROs".

As mandated by the Dodd-Frank Act, the Office of Credit Ratings("OCR" or the "Office") was created in support of the Commission's

mission to protect investors, facilitate capital formation, and maintainfair, orderly, and efficient markets.

The Office is charged with administering the rules of the Commission:with respect to the practices of NRSROs in determining credit ratings, forthe protection of users of credit ratings and in the public interest;promoting accuracy in credit ratings issued by NRSROs; ensuring thatcredit ratings are not unduly influenced by conflicts of interest; andhelping to ensure that firms provide greater disclosure to investors.

In support of this mission, OCR monitors the activities and conductsexaminations of registered NRSROs to assess and promote compliancewith statutory and Commission requirements.



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The Office is located in New York and Washington, D.C. and is staffedwith examiners, attorneys, and accountants with expertise in structuredfinance, corporate finance, municipal finance, financial institutions,insurance companies, and credit rating agencies.

Background Regarding Credit Rating Agencies

Credit rating agencies are organizations that provide an opinion on thecreditworthiness of a company or a financial instrument.

The NRSROs were recognized as such by the Commission staff througha no-action letter process until 2006, when Congress passed the CreditRating Agency Reform Act (the "Reform Act") that added Section 15E tothe Exchange Act and provided the Commission with the authority toestablish a registration and oversight program for credit rating agencies

registered as NRSROs.

To date, through a series of rulemakings, the Commission hasimplemented a number of Exchange Act provisions related to NRSROs.

Core Activities of the Office

The establishment of the Office consolidates and enhances theintegration of activities that had previously been conducted by variousOffices and Divisions. The core activities of OCR include the following:

Monitoring: The monitoring activities are geared towards informingCommission policy and rulemaking and include identifying andanalyzing risks, monitoring industry trends, and meeting with NRSROmanagement to discuss organizational and industry developments.

OCR drafts annual reports to Congress addressing adopted and proposedrules, the status of registrants and applicants, and the state ofcompetition, transparency, and conflicts of interest among nationallyrecognized statistical rating organizations.

The Office also conducts ad-hoc research as warranted by industry orcredit market conditions and contributes to statutorily mandated studies.In addition, the Office administers and monitors the NRSRO registrationprocess as well as the periodic updates by existing registrants of theirForms NRSRO.



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Examinations:The examination activities include conducting legislativelymandated annual, risk-based examinations of all registered NRSROs toassess compliance with federal securities laws and SEC rules.

The examinations also serve to help ensure adherence to the NRSROs'

internal policies, procedures, and methodologies for determining creditratings.

As a product of this work, OCR drafts an annual public reportsummarizing the findings of such examinations.

The Office also conducts special risk-targeted examinations based oncredit market issues and concerns and to follow up on tips, complaints,and NRSRO self-reported incidents.

Other examination objectives include promoting compliance, working to

ensure that NRSROs conduct their activities with integrity andimpartiality, and working to ensure the adoption of best practices withinthe credit rating industry.

Other Activities: Other activities of the Office include providingassistance to the Division of Trading and Markets with respect to thedevelopment and modification of SEC rules and forms; referring, whenwarranted, potential violations of securities laws to the Division ofEnforcement; collaborating with other Offices and Divisions of theCommission to identify risks and leverage knowledge; and, consulting

and coordinating with international regulators with respect to non-U.S.based registrants.



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Dodd Frank Act, Subtitle C Improvements to the Regulationof Credit Rating Agencies

SEC. 931. FINDINGS.

Congress finds the following:

(1)Because of the systemic importanceofcredit ratingsand the relianceplaced on credit ratings by individual and institutional investors andfinancial regulators, the activities and performances of credit ratingagencies, including nationally recognized statistical rating organizations,arematters of national public interest, as credit rating agencies are centralto capital formation, investor confidence, and the efficient performance ofthe United States economy.

(2)Credit rating agencies, including nationally recognized statisticalrating organizations,play a critical gatekeeper role in the debt marketthat is functionally similar to that of securities analysts, who evaluate thequality of securities in the equity market, and auditors, who review thefinancial statements of firms. Such role justifies a similar level of publicoversight and accountability.

(3)Because credit rating agencies perform evaluative and analyticalservices on behalf of clients, much as other financial gatekeepersdo,

the activities of credit rating agencies are fundamentally commercial incharacter and should be subject to the same standards of liability andoversight as apply to auditors, securities analysts, and investmentbankers.

(4)In certain activities, particularly in advising arrangers of structuredfinancial products on potential ratings of such products, credit ratingagencies face conflicts of interest that need to be carefully monitored andthat therefore should be addressed explicitly in legislation in order to giveclearer authority to the Securities and Exchange Commission.

(5)In the recent financial crisis, the ratings on structured financialproducts have proven to be inaccurate.



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This inaccuracy contributed significantly to the mismanagement of risksby financial institutions and investors, which in turn adversely impactedthe health of the economy in the United States and around the world.

Such inaccuracy necessitates increased accountability on the part ofcredit rating agencies.



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NUMBER 2

Thematic Peer Review of ResolutionRegimes, Questionnaire

Introduction

The global financial crisis demonstrated theurgent need to improve resolution regimes so as to enable authorities toresolve failing financial institutions quickly without destabilising thefinancial system or exposing taxpayers to the risk of loss from solvencysupport.

Following the crisis, a number of jurisdictions have adopted, or arecurrently preparing, legislation to strengthen their resolution regimes,while some progress has also been made in establishing crisis

management groups and enhancing cross-border cooperation.

In November 2011, the FSB issued the Key Attributes of EffectiveResolution Regimes for Financial Institutions as part of the package ofpolicy measures to address the moral hazard risks posed by systemicallyimportant financial institutions.

The Key Attributes (KAs) set out the core elements of effective resolutionregimes that apply to any financial institution that could be systemicallysignificant or critical if it fails.

A drafting team set up under the FSBs Re solu t ion St eerin g Grou p

(ReSG) is currently developing an assessment methodology that providesgreater technical detail on the various elements of the KAs.

Resolution regimes have been identified as a priority area under the FSBCoordination Framework for Implementation Monitoring (CFIM).

As a result, the implementation of the KAs by FSB member jurisdictionswill undergo intensive monitoring and detailed reporting.

To ensure effective implementation, the FSB decided, as stated in itsNovember 2011 Progress Report to the G20 Leaders, to carry out an

iterative series of peer review assessments of implementation of the KeyAttributes, with a first thematic peer review beginning by end-2012.

The FSB Standing Committee on Standards Implementation (SCSI), in itsmeeting on 13-14 December 2011, agreed to undertake a peer review inthis area in the second half of 2012.



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The objective of this first peer review in this area is to evaluate FSBmember jurisdictions existing resolution regimes and any plannedchanges to those regimes using the KAs as a benchmark.

The peer review will not assess jurisdictionscompliance with the KAs or

assign grades, but it will provide a comparative analysis of existingregimes and of progress made by different jurisdictions to those regimes,both across individual KAs and across different financial sectors (banking,insurance, securities, financial market infrastructures).

In doing so, the review will give due consideration to sectoral specificitiesand recognise that not all powers and characteristics of resolution regimesset out in those KAs are suitable or relevant for all sectors and under allcircumstances.

In particular, the objectives of the review are to:

-Take stock of national resolution regimesthat apply to different typesof financial institutions, and of any planned changes to those regimes;

- Highlight good practices in national resolution regimesas well as anymaterial inconsistencies or gaps (compared to the KAs) that wouldneed to be addressed;

- Evaluate progress in implementing reforms to national resolutionregimesusing the KAs as a benchmark, and identify challengesarising from their implementation; and

-

Inform and help to improve the assessment methodology byidentifying needed clarifications or revisions to the essential criteriaand/ or explanatory notes.

- The primary source of informationfor the peer review will be memberjurisdictionsresponses to this questionnaire.

The questionnaire is divided into two sections:

Section 1 seeks general information about recent experiences with theresolution of systemically significant or critical financial institutions andlessons learned; recent reforms to resolution regimes; and plans and

timelines for additional reforms; and

Section 2 focuses in more detail on national implementation (or plannedimplementation) of the KAs in resolution regimes across different sectors in terms of the legal (including supervisory) framework as well as of



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institutional capacities and practices drawing on the draft assessmentmethodology prepared by a team of experts under the FSB ResolutionSteering Group.

Annex I , which is drawn from the latest version of the draft assessment

methodology for the KAs, reproduces the definitions of key terms that areused in the questionnaire.

National authorities should provide a consolidated response that coversall financial sectors in their jurisdiction.

The response should include descriptions of differencesin theapplication of national resolution regimes to different types of financialinstitutions where these exist.

In addition to the consolidated response, national authorities may alsochoose to provide (where appropriate) sector-specific responses withadditional detailed information on the resolution regimes for differentsectors.

Respondents are encouraged to draw on their responses to prior surveyson resolution where those are relevant for this questionnaire.

National authorities are requested to include planned reforms toresolution regimes in their responses only if those reforms are articulatedin a document (e.g. consultation paper or legislative proposal) that isalready publicly available or is expected to be published no later than theend of 2012.

In the case of the recent legislative proposal for bank recovery andresolution in the European Union (EU), the European Commission isrequested to provide responses to section 2 of the questionnaire based onthat proposal.

Those FSB member jurisdictions that are EU member states are alsorequested to provide responses on planned reforms to their resolutionregimes if these reforms differ or go beyond the EU proposal.

Feedback should be submitted by Friday, 28 September 2012 to

[email protected] under the subject heading FSB Thematic Peer Review onResolution Regimes. Individual submissions will not be made public.

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Important part - Please indicate in the tables below whether the domesticauthorities listed in the left-hand column are able, under the legalframework in your jurisdiction, to disclose non-public informationnecessary for recovery and resolution planning and for carrying outresolution with other authorities (specified in the top row of the table) thathave a role in resolution.

Table 1covers information sharing between domestic authorities, while

Table 2covers information sharing with foreign authorities. Fields shouldbe marked asYESwhere information can be shared with the domesticor foreign authority in question, and NO where it cannot be sharedunder any circumstances.



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Please explain whether any of the following conditions or restrictions forsharing non-public information for resolution purposes apply:

(a)Limitationson the classes of information that can be disclosed;

(b) Requirement for MoUs with the receiving authority;

(c)Adequate confidentiality protectionsby the authority that receivessuch information;(d) Use of the informationonly for the purposes specified by the providerof the information; consent from the authority providing the informationis required for any onward sharing of that information;(e) Any other conditions(please explain).

Definitions of key terms used in the questionnaire

bail-in within resolution restructuring mechanisms within resolution

to recapitalise a financial institution or capitalise a bridge institution,through the write-down, conversion or exchange of debt instruments (e.g.,senior or subordinated unsecured debt instruments) under specifiedconditions, as appropriate to legal frameworks and market capacity,including the conversion or exchange of debt and other creditor claims toor for equity or other instruments in a newly formed bridge institution.

bail-out any transfer of funds from public sources to a failedinstitution or a commitment by a public authority to provide funds with a

view to sustaining a failed institution (e.g., by way of guarantees) thatresults in benefit to the shareholders or uninsured creditors of thatinstitution, or the assumption of risks by the public authority that wouldotherwise be borne by the institution and its shareholders, where thefunds transferred are not recouped from the institution, its unsecuredcreditors or, if necessary, the financial system more widely, or the nationalauthority is not reimbursed for the risks assumed.

bankany institution that is involved in either the provision of credit ordeposit-taking and other repayable funds from the public, and that is

defined by the relevant national legislation as a bank.

bridge institution a temporary bank, financial company or other entitythat is established to take over and continue certain operations of a failedinstitution as part of the resolution process.



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emergency liquidity assistance on standard terms the provision ofliquidity against collateral in accordance with the standards terms of thecentral bank.

early termination rights contractual acceleration, termination andother close-out rights in financial contracts that in particular may betriggered on the occurrence of an event or circumstances set out in thefinancial contract, such as when the resolution authorities initiateresolution proceedings or take certain related resolution actions withrespect to an institution.

entry into resolution- the formal determination by the relevantauthority or authorities that an institution meets the conditions forresolution and that it will be subject to resolution measures.

financial institution orinstitution any entity the principal businessof which involves the provision of financial services or the conduct offinancial activities, including deposit-taking, credit intermediation,insurance, investment or securities business or operating financial marketinfrastructure.

financial market infrastructure (FMI) a multilateral system amongparticipating financial institutions, including the operator of the system,used for the purposes of clearing, settling or recording payments,

securities, derivatives or other financial transactions.

It includes payment systems, central securities depositories, securitiessettlement systems, central counterparties, and trade repositories.

group a parent company (which may be a holding company) and itsdirect and indirect subsidiaries, both domestic and foreign.

holding company a company that is not itself a financial firm, formedto control financial firms. This concept covers intermediate or ultimatecontrol.

institution in resolution a financial institution in relation to whichresolution powers are being exercised. Where resolution powers have



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been exercised in relation to an institution, that institution is consideredto bein resolution for as long as it remains subject to measures taken orsupervised by a resolution authority or insolvency proceedings initiated bythe resolution authority.

investment firmorsecurities firm any non-deposit-takinginstitution whose principal activity is conducting investments operationson a regular basis, including: safeguarding and administeringinvestments or securities; dealing in investments or securities asprincipal; and dealing in investments or securities as agent.

legal framework the comprehensive legal system for a particularjurisdiction established by any combination of the following: aconstitution; primary legislation enacted by a legislative body which has

authority in respect of the jurisdiction; subsidiary legislation made byauthorities authorised by the primary legislation for such jurisdiction; andlegal precedent and customs applied by the courts.

open firm financial assistance the provision of public funds to aninstitution in resolution where the ownership structure of that institutionhas not been changed.

That is, the shareholders retain control and the institution is not within aframework (such as receivership or conservatorship) where the control

rights are modified.

resolution any action taken by a national authority in respect of afailed institution, including in particular the exercise of a resolutionpower specified in KA 3, with or without private sector involvement, withthe aim of maintaining financial stability or ensure continuity ofsystemically important functions and or protecting insured depositors,insurance policyholders or investors.

Resolution may include the application of procedures under insolvencylaw to parts of an institution in resolution, in conjunction with theexercise of resolution powers.



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resolution authority an authority which, either alone or together withother national authorities, is responsible for the resolution of aninstitution. References in this document to a resolution authorityshould be read asresolution authority or authorities.

resolution regime the legal framework and policies governing theapplication of the resolution powers by national authorities forinstitutions.

This may consist of sector-specific statutes and rules, or may consist of asingle regime covering all institutions.

The KAs are neutral as to the form of the regime, provided that allinstitutions that could be systemically significant or critical in the event of

failure are subject to an effective resolution regime.

KA 1 (Scope)KA 2 (Resolution Authority)KA 3 (Resolution Powers)KA 4 (Set-off, collateralization, segregation of client assets)KA 5 (Safeguards)KA 6 (Funding of institutions in resolution)KA 7 (Legal framework for cross-border cooperation)

KA 10 (Resolvability assessments)KA 11 (Recovery and resolution planning)

KA 12 (Access to information and information sharing)



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NUMBER 3

Learning about compliance and opportunities

Office of Compliance (OOC)

The Office of Compliance (OOC) is anindependent, non-partisan agency establishedto administer and enforce the CongressionalAccountability Act (CAA).

OOCsMission

The OOC administers and ensures the integrity of the dispute resolutionsystem established to resolve disputes that arise under the CAA; carriesout an education and training program for Congressional Members,employing offices, and Congressional employees to assist them inunderstanding their rights and responsibilities under the CAA; andadvises Congress on needed changes and amendments to the CAA.

The General Counsel of the OOC has independent investigatory and

enforcement authority for certain violations of the CAA.



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OOCsOrganizational Structure

The OOC has a five-member, non-partisan Board of Directors and fourExecutive Staff, appointed by the Board of Directors, who carry out theday-to-day functions of the Agency.

The Agency also employs an experienced team of education andcommunications staff, general administrative staff, staff attorneys, andsafety & health inspectors.

REPORT ASSESSES CONGRESSIONAL COMPLIANCEWITH WORKPLACE RIGHTS LAWS, REPORTHIGHLIGHTS:

6,300 safety and health hazards projected to be found in Congressionalproperties for 111th Congress, a substantial decrease of 30% from 110thCongress

New workplace protections enacted for Congressional employees,while OOC continues to work with Congress to ensure approval ofregulations to give eligible veterans preference rights in the LegislativeBranch

Baseline survey reveals that most Congressional employees need toknow more about their workplace rights and how to seek redress forviolations of their rights

Most employment claims by Congressional employees relate todiscrimination and/ or harassment based on protected trait such as sex,race, disability, age

Washington, DC - A newly released report assesses Congressscompliance with workplace rights laws and provides statisticalinformation about the types of claims, such as unlawful discriminationand harassment, made by Congressional employees against theiremployers in the Legislative Branch.



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The report also assesses Congressional compliance with safety and healthrequirements under the Occupational Safety and Health Act (OSHA) andaccess to public accommodations and services requirements for thedisabled under Titles I I and I I I of theAmericans with Disabilities Act(ADA).

The fiscal year 2009 annual reportState of the CongressionalWorkplace:

A Report on Safety & Health, Accessibility, and Workplace Rights Underthe Congressional Accountability Actwas issued by the Office ofCompliance (OOC), an independent, non-partisan Legislative Branchagency.

The report highlights new workplace rights laws that Congress extendedto its employees in FY 2009 and which significant workplace rightsCongressional employees still do not have compared to employees in theprivate sector and Executive Branch.

The Parity Gap Analysissections of the report recommend thatCongress extend their additional protections to Congressional employees,applicants, former employees, and (with regard to access to publicaccommodations and services) the general public.

The OOC was established nearly 15 years ago by the CongressionalAccountability Act of 1995 (CAA) as part of the statute created for thepurpose of applying to Congress those employment, labor, and health andsafety laws that apply to the private sector and the Federal Executivebranch.

Prior to the CAAs passage, Congress exempted itself and its Membersand employing offices -- from liability under these laws.

The OOC provides Congressional employees, including House andSenate staffers and most workers of Legislative Branch agencies, thevenue to seek redress for alleged violations of employment, labor, andsafety and health laws.



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Congress currently employs over 30,000 employees nationwide and is oneofthe largest employers in the Washington, DC metropolitan area.

The General Counsel of the OOC also conducts inspections of over 17million sq. ft. of Legislative Branch properties in the Washington, DCarea to ensure safety and health compliance with the OSHA and access topublic accommodations provisions of the Congressional AccountabilityAct and services under the ADA.

Part of our statutory mandate is to keep Congress informed about themany facets of Congressional compliance with the CAA.

We do this, in part, by issuing reports on OSHA and ADA compliance,compiling statistics about the use of the OOC by employees, and

providing recommendations to Congress about the rights thatCongressional employees should have that they currently dont,saidTamara E. Chrisler, the Executive Director of the OOC.

This annual report summarizes that statutorily required information andcontains additional information to provide a more holistic educational toolfor Congressional Members, employees, and the American people tobetter understand Congressional accountability in the workplace.

It explains what is going on, where there have been successes, and where

there are opportunities for improvement.

STATE OF SAFETY & HEALTH

6,300 Safety And H ealth Hazards Projected To Be Found InCongressional Properties For 111th Congress, A 30% Decline ComparedTo The 110th Congress

The OOC conducts inspections of Congressional properties once every

Congress as required by the CAA.

The most recent completed inspection was for the 110th Congress(2007-2008) and was reported to Congress in fiscal year 2009.



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The inspection covered over 96% of Legislative Branch properties inthe Washington, DC Metropolitan area over 17 million sq. ft. thelargest completed inspection to date.

Inspections for the 111th Congress (2009-2010)which will cover 17.5million square feet once completed -- are in progress, but the reportprovides projections about the number of hazards expected to be foundand actual findings based on information available at the time the reportwent to print.

The inspection for the 110th Congress (2007-2008) found approximately9,250 OSHA hazards in Congressional properties, a decrease of almost30% from the inspection for the 109th Congress (2005-2006), which foundover 13,140 hazards in approximately 15.4 million square feet.

For the inspections for 111th Congress (2009-2010), the OOC projects thatthey will find 6,300 hazards, a further decrease of 30%.

The actual hazards found during inspection for the 111th Congress couldeven be lower.

Peter Ames Eveleth, the General Counsel for the OOC, attributed therapid decline in the number of hazards to two factors.

The first factor was that we provide comprehensive, meaningfulinformation to employing offices and members of Congress about eachhazard. Thatsa key value of our inspection process.

We locate each hazard, categorize it by type of hazard, and assess its riskto the safety and health of building occupants.

We also serve as technical advisors to employing offices and reviewabatement plans to determine their adequacy.

Its a collaborative process that involves sharing and

discussing data so that everyone has the information they need tosuccessfully abate hazards.



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The second factor identified by Eveleth was that employing officesimplemented proactive programs to identify and abate hazards beforeinspection.

The dramatic reduction in hazards and its continuing trend downward isdue, in large part, to intense, proactive efforts on the part of CongressionalMembers and employing offices in Congress.

Members are asking us to help them identify and determine how toabate the hazards in their offices.

Only 7 Congressional Members had hazard free offices in the 109thCongress.

For the 110th, we had 37. For the 111th, we had 140,said Eveleth.

The report also attributes the significant decline to House and Senateemployment counsel, the Office of the Architect of the Capitol, and theChief Administrative Officer of the House of Representatives forinstituting pre-inspection processes that included accompanying safetyand health professionals on visits to employing offices, notifying staff inthose offices about the hazards, and encouraging staff to correcthazardous conditions prior to the OOC inspections.

While there was substantial reduction of the number of hazards found inthe 110th Congress as compared to the 109th Congress, roughly 25% of theunabated hazards in the 110th Congress or2,300were classified ashigh risk.

These risks have the potential to cause death or serious injury tooccupants and/ or have a very high likelihood of occurrence if not abated.For the 111th Congress, 25% of unabated hazards or 1,575 -- are alsoprojected to be high risk.

According to OOCsprocedures, each hazard is assigned a risk

ass essment cod e, or RAC, so t h at employing offices canunderstand the severity and probability of occurrence for an unabatedhazard.



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RAC 1 and RAC 2 hazards are considered high risk hazards that have thepotential to cause death and/ or severe injury.

For the inspections for the 110th Congress and the projections for theinspections of the 111th Congress, less than 1% of hazards were RAC 1, themost dangerous type of hazard, and approximately 25% of the hazardswere RAC 2.

All RAC 1 hazards currently in Congressional properties are related tosome form of fire safety.

The House is not projected to have any RAC 1 hazards for the 111thCongress, and the Senate is projected to have 9.

Some RAC 1 hazards have remained unabated years after they werereported by the OOC and/ or citations were issued to the responsibleemploying office.

We are very concerned that RAC 1 fire hazards remain unabated.

The OOC is focused on ensuring a safe workplace for employees, visitors,and Members.

At the same time we recognize that the RAC 1 hazards are costly to fix and

some abatement options affect the architecture of historic buildings.

We are currently working with our oversight committees and the Office ofthe Architect of the Capitol to address these important issues and achieveinterim and long term solutions to abate these dangeroushazards,said Chrisler.

STATE OF WORKPLACE RIGHTS

The report explains that the genetic information nondiscrimination

protections and extended family leave enacted by Congress in fiscal year2009 to apply to the private sector and the Executive Branchwere extended to cover Congressional employees.



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The Genetic I nformation Nondiscrimination Act offers protections toCongressional employees, should discrimination occur due to theirgenetic information, including an employing officesknowledge of theemployees family medical history.

As the report explains, veterans still do not have preference rights inhiring and other employment matters in the Legislative Branch.

Th e Veterans Emp loym en t Opport un ities Act of 1998 (VEOA )provides for veterans preferences in hiring and other employmentmatters in the Federal government.

Although Congress enacted the VEOA and made it applicable to eligibleveterans in the Legislative Branch, the statute contains a provision that

the rights and protections of the VEOA will not take effect in theLegislative Branch until VEOA regulations specific to Congress areissued.

VEOA regulations were drafted by the Board of Directors of the OOCand, after receiving comments from Congress and employing offices, theBoard adopted the regulations in M arch 2008 and sent them to Congressfor final approval.

Under the CAA, the adopted regulations have no legal effect until

Congress approves the regulations.

Although various Congressional offices have expressed interest in seeingfinal approval, it has not yet occurred.

Therefore, certain veterans do not have the preference rights in Congressthat are enjoyed in the Executive Branch of the Federal Government. Wehave been working diligently with our oversight committees and also withMembers of Congress to garner their support for Congressional approvalof the VEOA regulations.

So many Members of Congress are staunch advocates of veteransemployment rights and opportunities that implementing these rights for



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veterans would send a clear message of Congressional support, saidChrisler.



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NUMBER 4

Economic and Financial Developments in Malaysia in theSecond Quarter of 2012

OVERVIEWMalaysia recorded higher growth in the second quarter

The global economic environment remained challenging in the second

quarter, amidst heightened vulnerabilities in several key economies.

Growth in the major advanced economies was weighed down by policyand domestic structural concerns.

In Asia, economic activity was affected by weaker external demand.

In spite of this challenging environment, the Malaysian economyrecorded a higher growth of 5.4% (1Q 12: 4.9%), driven by strongerdomestic demand, which rose by 13.8% (1Q 12: 9.7%).

This was supported by robust growth in the expenditure of both theprivate and public sectors, while net exports moderated further due toweaker exports and higher imports.

On the supply side, most major economic sectors continued to expand,led by the services, manufacturing and construction sectors.

Gross fixed capital formation recorded a stronger growth of 26.1% (1Q 12:

16.1%), amidst increased capital spending by both the private and publicsectors.

Private investment strengthened further, supported by investment in thedomestic-oriented services sub-sectors, oil and gas and manufacturing



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industries.

Expansion in public investment was driven by non-financial publicenterprisescapital spending in the transportation, oil and gas andutilities sectors, as well as the Federal Governmentsdevelopmentspending on transportation, trade and industry, public utilities andeducation.

Growth of private consumption registered a strong growth of 8.8% (1Q 12:7.4%), supported by firm labour market conditions, robust income growthand improved consumer sentiment.

In addition, Government initiatives such as financial assistance to thelower income households and FELDA settlers, as well as increases in the

salaries and pensions of civil servants also supported the increase inspending. Public consumption increased by 9.4% (1Q 12: 7.3%), led byhigher spending on emoluments and supplies and services.



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On the supply side, most economic sectors expanded further.

This was supported by domestic-driven activity in the services sector,namely communication, real estate and business services, and the financeand insurance sub-sectors.

The manufacturing sectorwas driven by higher growth in theexport-oriented industries and a continued expansion of the domesticoriented industries.

The construction sectorrecorded a strong double-digit growth for thesecond consecutive quarter amidst increased activities in the civilengineering sub-sector.

The mining sectorexpansion reflected the higher output of crude oil,while the agriculture sector recorded a contraction due to lower crudepalm oil production.

The headline inflation rate, as measured by the annual change in theConsumer Price I ndex (CPI), moderated to 1.7% in the second quarter(1Q 12: 2.3%).

Inflation in the food and non-alcoholic beverages category moderatedamid a decline in the prices of meat and vegetables.

In the external sector, the current account surplus narrowed in the secondquarter to RM9.6 billion, equivalent to 4.4% of GNI.

The lower surplus was due mainly to the lower goods surplus, largely as aresult of higher expansion of gross imports amid moderating growth ingross exports.

The financial account recorded a turnaround with inflows of RM5.4billion during the quarter (1Q 12: -RM10.3 billion), as net inflows in otherinvestment and FDI rose, which offset the net outflow of non-residentportfolio funds.



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FDI was sustained at RM6.1 billion (1Q 12: +RM7.5 billion), supported byinflows of equity capital and higher extensions of inter-company loans tomultinational companies operating in Malaysia.

Direct investment abroad by Malaysian companies moderated to RM2.5billion in the second quarter (1Q 12: -RM16.9 billion), reflecting a loweroutflow of equity capital and intercompany loans, and net repatriatedearnings by Malaysian companies operating abroad.

With surpluses in both the current and financial accounts, the overallbalance of payments turned around to record a surplus of RM12.7 billionin the second quarter (1Q 12: -RM7.2 billion).

The international reserves of Bank Negara Malaysia increased to

RM428.8 billion (equivalent to USD134.2 billion) as at 29 June 2012.

This reserve level has taken into account the quarterly adjustment forforeign exchange revaluation gains, following the strengthening ofcurrencies against the ringgit during the period.

As at 31 July 2012, the reserves position amounted to RM429.6 billion(equivalent to USD134.5 billion), sufficient to finance 9.5 months ofretained imports and is 3.9 times the short-term external debt.

Monetary policy remained supportive of economic activity

The Overnight Policy Rate (OPR) was left unchanged at 3.00% during thesecond quarter of 2012.

At the prevailing level of the OPR, monetary conditions continue to besupportive of economic activity.

Reflecting the unchanged OPR, the average interbank rates of all

maturities were relatively stable.

In terms of retail interest rates, the average quoted fixed deposit (FD)rates of commercial banks were relatively unchanged during the quarter.



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The average base lending rate (BLR) of commercial banks remainedunchanged at 6.53%, while the weighted average lending rate (ALR) onloans outstanding remained stable, standing at 5.60% as at end-June 2012(end-March 2012: 5.62%).

In the second quarter, total gross financing raised by the private sectorthrough the banking system and the capital market increased to RM280.6billion (1Q 12: RM259.9 billion).

The higher gross financing was attributable mainly to the increase in loandisbursements to businesses and initial public offerings (IPOs) during thequarter.

On a net basis, banking system loans and PDS outstanding expanded at

an annual growth rate of 13.0% as at end-June 2012 (1Q 12: 13.3%).

Net funds raised in the capital market amounted to RM27.6 billion duringthe quarter (1Q 12: RM43.5 billion), mostly by the private sector.

Funds raised from the equity market increased significantly to RM12.1billion (1Q 12: RM1.3 billion), due to a large initial public offering in June.

After adjusting for redemptions, net funds raised by the private sectoramounted to RM22.6 billion.

In the public sector, net funds raised during the quarter amounted toRM5.0 billion (1Q 12: RM13.7 billion).

The monetary aggregates grew at a moderate pace during the secondquarter.

M1, or narrow money, increased by RM3.5 billion.

On an annual basis, M1 expanded by 9.9% as at end-June (end-March2012: 13.2%).

M3, or broad money, grew by 12.8% annually as at end-June 2012(end-March 2012: 15.0%).



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The moderate expansion in M 3 was attributable to higherGovernment fundraising activities and net portfolio outflows during thequarter.

The ringgit depreciated by 3.8% against the US dollar in the secondquarter, along with most other regional currencies.

Renewed uncertainties over the European sovereign debt crisis and itsimpact on the prospects for regional and global economic growthprompted some investors to reduce holdings of emerging market assets.

Against other major currencies, the ringgit depreciated against the poundsterling (-1.6%) and the Japanese yen (-7.0%), while strengthening againstthe euro (2.0%).

Against the other regional currencies, the ringgit depreciated in the rangeof between 0.7% and 5.4%.

During the period 1 July to 13 August 2012, the ringgit appreciated againstthe euro (4.7%), US dollar (2.3%), pound sterling (1.9%) and Japanese yen(0.9%).

The ringgit also appreciated against regional currencies, strengtheningagainst the Korean won, Thai baht, Philippine peso, Indonesian rupiah

and Chinese renminbi by between 0.6% and 2.3%.

The ringgit remained unchanged against the Singapore dollar.

Domestic financial stability is sustained

Financial stability remained intact throughout the second quarter of 2012,underpinned by strong capitalisation of financial institutions and orderlyfinancial market conditions.

Financial markets continued to demonstrate strong capacity to withstandexternal shocks and volatility arising from the escalation of sovereign riskin the Euro area.



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The banking sector remained resilient during the quarter, amid sustainedprofitability and ample liquidity.

Capitalisation of the banking sector remained stable with thecore capitalratio and risk-weighted capital ratio at 12.9% and 14.7% respectively.

Similarly, the insurance sector remained resilient with a strong capitaladequacy ratio of 216.7%.

Recovery to continue at a modest pace but downside risks willremain

The global economic recovery continued in the second quarter, albeit at amore modest pace.

Going forward, the global economy faces increasing downside risksemanating from the developments in several major economies.

Policy uncertainty surrounding the European sovereign debt crisis andfiscal issues in the US are expected to weigh on market sentiments andgrowth prospects.

For the Malaysian economy, the strong support provided by domestic

demand, underpinned by activities in both the private and public sectorshave ensured higher growth amidst the challenging global environment.

This trend is expected to be sustained going forward, although downsiderisks emanating from external developments remain.



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Learning More

Established on 26 January 1959 under the Central Bank of Malaysia Act1958 (CBA 1958).

The CBA 1958 has been repealed by the Central Bank of Malaysia Act2009 which became effective on 25 November 2009.

It is a statutory body wholly owned by the Government of Malaysia withthe paid-up capital progressively increased, currently at RM100 million.

The Bank reports to the Minister of Finance, Malaysia and keeps theMinister informed of matters pertaining to monetary and financial sectorpolicies.

Roles and Functions

Among the major role of the Bank is the prudent conduct of monetarypolicy, which has seen generally low and stable inflation for decades andthereby, preserving the purchasing power of the ringgit.

The Bank is alsoresponsible for bringing about financial system stabilityand fostering a sound and progressive financial sector.

There is now in place a well diversified, comprehensive and resilientfinancial sector, that is able to meet the increasingly sophisticated needsof consumers and businesses, and which has become a growth driver inthe economy.

The Bank also plays a significant developmental role, including

development of financial system infrastructure with major emphasisplaced on building the nation's efficient and secured payment systems aswell as the necessary institutions (including Securities Commission,KLSE, now known as Bursa Malaysia and Credit Guarantee Corporation)



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which are important towards building a comprehensive, robust andresilient financial system.

The Bank actively promotes financial inclusion, which has led toimproved access to financial services for all economic sectors andsegments of society, thereby supporting balanced economic growth.

Other important roles of the Bank are being a banker and adviser to theGovernment, playing an active role in advising on macroeconomicpolicies and managing the public debt.

It is also the sole authority in issuing currency as well as managing thecountry's international reserves.

The roles of the Bank are supported by 39 departments/ units in the Bankcovering seven functional areas as follows:

Economics & Monetary Policy

Primarily provides good technical and research support on growth-relatedissues to enhance formulation of monetary and credit policies inpromoting monetary stability and ensuring the availability of adequatecredit to finance economic growth.

Investment and Operations

Manage domestic liquidity and exchange rates to ensure that monetarypolicy targets are achieved as well as managing external reserves tosafeguard its value and optimise its returns.

It also has the responsibility of providing advice and assistance to theGovernment in the area of debt and fund management and contributingto domestic financial market development.

Regulation

Promote financial sector stability through the progressive developmentof sustainable, robust and sound financial institutions and financial



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infrastructure, thus enabling a competitive local financial industry to beresilient against the changing future environment as well as leadsinitiatives to enhance access to financing.

It also formulates and implements policies and strategies towardsbuilding and positioning Malaysia as a premier integrated IslamicFinancial Centre and enhance the financial capability of consumers.

Payment Systems

Develop policies and strategies to promote reliable, secure and efficientclearing, settlement and payment systems in the country.Supervision

Develop, enhance and implement an effective surveillance framework toensure safety and soundness of financial institutions and to enforce soundpractices in them.

Organisational Development

Spearhead the Bank's strategic management, rganisational-performancemanagement and programme management functions to drive itsperformance-improvement processes and strengthening the capacity

building of the Bank.

It also leads and drives human resources initiatives and other strategicactivities to ensure that the overall H uman Capital Managementframework is implemented effectively.

Communications

The communications function has assumed increasing importance inresponse to the heightened demands of the various stakeholders, seeking

greater transparency and disclosure.

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Risk Management Presentation August 27 2012

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