I very much hope that I can convince you today why this is so. As I shall demonstrate later, the financial significance of Asia is indisputable. Yet, in many parts of Asia, financial intermediation, which is so important to promoting economic growth and development, remains elementary. There is I think an urgent need for Asia to harness its substantial financial resources for promoting growth and development but also for minimising Asia’s vulnerability to financial instability. With financial globalisation, the ability of Asia to get this right has significant implications for global finance. I also hope that I can, at the same time, raise your interest in some of the specific monetary and financial issues that we are tackling, in the region as a whole and in individual economies, with a special emphasis on China, including Hong Kong, where I come from. Asian finance Let me begin with a description of Asian finance, as I see it. There are six characteristics I would like to draw your attention to. The first is the financial significance of Asia. As I mentioned earlier, this is phenomenal. It is easy to appreciate this by pointing to some impressive numbers, such as those relating to the amount of foreign reserves held by Asian economies and the amount of portfolio and foreign direct investments going into, or coming out of, Asia. Indeed, there are seven economies holding foreign reserves in excess of $ billion and all seven of them are in Asia1.
We have taken this step not because banks are weak but because they are in fact strong. Unlike in 2008, the banks are not the weak link in a crisis which this time is of public health; a crisis which is economic, but, at least in terms of its causes, non-financial in nature. This is notably the result of the regulations that we have implemented and reinforced over the last ten years. And it is what now gives us greater leeway to ease certain capital requirements, such as the counter-cyclical buffer, and to push back the entry into force of the Basel III accords by one year to 2023. All these measures should be considered in light of the – often heated – discussions on the degree of financial solidarity in Europe. Arguably, Europe could perhaps do more, but let’s not forget that it is already doing a great deal, thanks to major efforts from the Eurosystem or the easing – agreed quickly and unanimously – of the Stability and Growth Pact, which gives natural priority to national action. If we consider a possible role for the European Solidarity Mechanism (ESM), the amounts involved – around EUR 410 billion – would certainly be significant. However, the support provided by the ECB alone represents EUR 1,050 billion on the markets and up to EUR 3,000 billion in bank liquidity. Furthermore, the Monetary Union allows Italy and Spain to borrow at a far lower interest rate than before the euro.