The Fourth Hong Kong Monetary Authority (HKMA) Distinguished Lecture was held today (13 February), attracting over 400 participants. The Keynote Speaker was Mr Andrew Crockett, General Manager of the Bank for International Settlements. Dato' Dr Zeti Akhtar Aziz, Governor of Bank Negara Malaysia, was the Discussant.
Speaking on the theme "Monetary Policy and Financial Stability", Mr Crockett pointed out the importance of the nexus between monetary and prudential policies. He emphasised that, in achieving the elusive twin goals of financial and monetary stability, mutually reinforcing anchors as well as an enhanced appreciation of the interdependence of policies in the two areas would be required, regardless of the formal institutional division of responsibility.
"The preservation of stability in the financial system requires an understanding of how macroeconomic developments interact with institutional behaviour and prudential norms to support or undermine equilibrating tendencies. And the implementation of monetary policy requires an understanding of the fact that the consequences of monetary policy for economic behaviour go much wider than their impact on the consumer price index," Mr Crockett said.
"A greater consensus than now exists is required on the underlying relationship between monetary and financial stability (diagnosis) in order to better frame policy responses (remedies)," he said. "The basic conceptual framework for the promotion of financial stability is not fully adequate. It tends to see the interrelationship between monetary policy and financial supervision as being important in managing crises, rather than in their origination. There is not sufficient focus on the genesis of financial instability," Mr Crockett said.
Mr Crockett also drew supervisors' attention to the correlation of risks across institutions, meaning that prudential controls should be calibrated to the systemic relevance of individual institutions, rather than being the same for all.
In responding to Mr Crockett's lecture, Dr Zeti noted the importance of monetary and financial stability as a means towards sustainable growth. Dr Zeti cautioned, however, against too great a focus on achieving monetary and financial stability at all risks, she also stressed that consideration needed to be given to the influence of international factors, particularly for small and open emerging economies. "Measures that seek to build and enhance financial infrastructure would need to be implemented to better position the financial system to meet the demands of the economy and absorb any destabilising shocks," Dr Zeti said.
Mr Joseph Yam, Chief Executive of the HKMA, chaired the Distinguished Lecture. In his opening remarks, Mr Yam stressed the relevance of Mr Crockett's lecture both to the region and to the international financial community. "Much attention has been given to resolving the apparent conflicts between the two desirable objectives of monetary stability and financial stability, at the policy as well as the operation levels," said Mr Yam. "The recent experience of a number of jurisdictions has indicated problems in achieving both simultaneously," he observed.
The HKMA Distinguished Lecture was first launched in December 1996. It aims at providing a forum for the local financial community to hear and exchange views with influential figures from the international financial and academic community on issues of current and long term interest.
Speeches of Mr Joseph Yam, Mr Andrew Crockett and Dr Zeti are available on the HKMA website (http://www.hkma.gov.hk).
At the Fourth Hong Kong Monetary Authority Distinguished Lecture held today (13 February), Mr Andrew Crockett, General Manager of the Bank for International Settlements (standing), delivers a lecture on the theme "Monetary Policy and Financial Stability".
Dato' Dr Zeti Akhtar Aziz, Governor of Bank Negara Malaysia (right, on stage) is the Discussant, and Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority (left, on stage), chairs the Lecture.
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Jasmin Fung, Manager (Press), at 2878 8246 or
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Hong Kong Monetary Authority
13 February 2001
