The Chief Executive of the Hong Kong Monetary Authority (HKMA),
Mr Joseph Yam, today (Wednesday) called on Asian economies to look
at how they can promote conditions which will not only foster a
full and speedy recovery, but which will also ensure that recovery
is balanced, healthy and sustainable.
Speaking in Hong Kong at the Sixth Annual Far Eastern Economic
Review Conference, Hong Kong and Asia: Strategies for
Recovery, Mr Yam said that the Asian financial crisis had
encouraged economies in the region to look at issues affecting the
success of a region more urgently and energetically.
Mr Yam said that, regardless of what forms of international
monitoring and regulation might arise out of the discussions
currently in progress, domestic financial systems would remain the
basic building blocks of the international financial system for the
foreseeable future.
"If the Asia financial crisis has taught us anything, then it
must surely be that the globalisation and liberalisation of markets
require stronger, not weaker, domestic systems," he said.
He noted that, as a positive outcome of the Asian financial
crisis, economies all over the region were taking important steps
towards reforming their financial systems. These reforms should
leave Asia's financial systems in a much healthier condition and
make them more resilient in the face of future financial crisis,
and more capable of exploiting new opportunities.
Apart from addressing the problems on Asia's immediate horizon,
Mr Yam said that there were also more fundamental longer-term
forces shaping and re-shaping the financial landscape, which would
have an important impact on how Hong Kong and other financial
centres in the region developed into the next century.
"It is important that we take the necessary preparatory measures
to ensure that this impact is a positive one, and that we put
ourselves in a position to get the best advantage of the changes
that lie ahead," he said.
Having taken into account the impact of longer-term forces on
the banking industry, including globalisation, technological
advance and changing customer needs, the HKMA had commissioned the
Hong Kong Banking Sector Consultancy Study last year to
look into the strategic development of Hong Kong's banking
industry. The recommendations in this study were now under
consideration by the Government.
For the banks themselves, the forces of change mean that they
would have to work harder to identify and sustain business and to
succeed in an increasingly competitive environment, said Mr
Yam.
Noting that financial service providers in the US and in Europe
had undergone consolidation to achieve economies of scale, Mr Yam
said: "Banks in Hong Kong - and, I would suggest, elsewhere in the
region - must also seriously consider this option if they wish to
continue competing effectively."
Mr Yam said that the necessary counterpart of the reforms now
being vigorously pursued within the region was reform at the global
level to an international financial architecture that had been
outgrown and outpaced by massive increases in the volume and speed
of cross-border fund flows.
"The aim of this reform should be, not to place barriers in the
way of these fund flows, but to provide a level of oversight and
transparency that will ensure that the excessive volatilities we
have recently seen are kept within reasonable bounds," he said.
"Our strategies for recovery in Asia must include this larger
international dimension, because whatever view one takes of the
exact causes of the Asian financial crisis, there is no doubt that
the activities of highly leveraged institutions played an important
role in provoking, spreading and deepening the crisis," he
added.
"Our capacity to recover, and our readiness to embrace the
opportunities that lie beyond recovery depend most of all on the
reforms we implement within our own jurisdictions," he said. "But
the economic stability that is a necessary condition of full
recovery, and our future as a community of open and outward-looking
markets, require decisive action at an international level."
Hong Kong Monetary Authority
16 June 1999
