Even over just the past two decades, we have seen a range of systemic events with a wide diversity in source and characteristics. We’ve seen credit booms and credit concentrations that resulted in substantial losses in the banking industry, in areas as varied as commercial real estate, energy, agriculture, and emerging market sovereigns. We have seen shocks reflected in sharp and substantial movements in interest rates, exchange rates, and asset prices. Some of these events were associated with a deterioration in macroeconomic performance. Some occurred in periods of relatively strong economic growth. Some were driven by abrupt changes in expectations about inflation or about monetary policy and the associated changes in the level of interest rates and the shape of the yield curve. Often these events followed periods of accommodative financial conditions, rapid credit growth, sustained rises in asset prices, and low volatility in the prices of financial assets. Many of these events had a self-reinforcing element, with initial changes in interest rates or asset prices being amplified by the subsequent actions of market participants in the face of unanticipated losses. Financial leverage was also an amplifying factor in many of these events. In some instances, there were unexpected patterns of correlation in the movement of asset prices and in credit losses across borrowers. These experiences led to changes in risk management practices, in supervision, and in our capacity as a central bank to contain systemic risk. These responses have reduced the overall vulnerability of the system to the types of shocks we’ve experienced.
The foundation is the development in Hong Kong of multi-currency clearing and settlement systems operated on a real-time gross-settlement basis: so far we have systems for the US dollar, the euro, and the renminbi, in addition to the Hong Kong dollar; there is the possibility of replicating this for any number of currencies, should the demand arise. To make these systems available in Asian time to the rest of the region, we are progressively linking them to other cities in China and with other countries in the region: we established a link with Malaysia in 2006 and have agreed with Bank Indonesia to establish a similar link with Indonesia in 2010. I have no doubt that other links will follow. In addition, through our Regional CHATS service launched in July 2007, we have made available Hong Kong’s own clearing and settlement services throughout the region and beyond for cross-border payments. By June this year, 30 banks in Hong Kong had registered as service providers for services covering over 2,000 payment beneficiary points in 42 economies. BIS Review 93/2009  1  These are examples of how we are helping to build the hardware, or – to use the transport comparison – laying down the roads, tracks, junctions and interchanges, for regional financial markets. For the software and the actual traffic, it is of course the case that in a free-market economy such as Hong Kong's there is a limit to how much the government should take the lead.