While the pandemic was raging, it was said again and again that these were unprecedented times. This is true, in that even though plagues have occurred repeatedly throughout human history, there has never before been an attempt to halt the spread of a pandemic with public health measures so wide-ranging that they extinguished the economic and social lives of entire countries. The war in Ukraine, on the other hand, has scores of historical precedents stretching back centuries. And yes, with this conflict, Europe has been set back in time. The economic sanctions that have been imposed on the Russians, like the disease-prevention measures during the pandemic, will leave a trail of aftershocks in their wake and will have broad economic repercussions for Iceland no less than for other countries. Honoured guests: In Adam Smith’s The Wealth of Nations, the magic of free enterprise is considered to lie in the fact that people can communicate through price formation in the markets. In this way, the markets will connect one coast to another, enabling people to work together without knowing one another – or indeed, without necessarily liking one another. It was the exalted invisible hand that harnessed self-interest in the service of the public interest. After two wars in Europe, Western politics was dominated by the conviction that the invisible hand could guarantee peace. (Note Icelanders’ optimism in referring to the former war and the latter war – as though no other world wars are even possible.)
This should not be surprising as the global FX market has become much bigger, with the average daily turnover in 2013 (USD 5.3 trillion 3) three times bigger than in 2004. Challenging times 15. As close partners, we have also faced significant challenges during difficult times in the past decade. 16. We all remembered vividly how a large part of the financial markets had almost come to a standstill after the collapse of Lehman Brothers in September 2008. Yet, the foreign exchange market continued to operate smoothly. Many market players had attributed the market stability to the support provided by CLS. 17. I also believe that our linkage with CLS has also provided the functional resilience and, importantly, confidence, that our market players needed in those critical moments. 18. This is certainly the case post Lehman’s collapse, as Hong Kong’s companies and individuals liquidated overseas assets and repatriated $ billion back into Hong Kong to tide themselves over the liquidity and credit squeeze. Looking forward 19. It is no exaggeration to say that CLS is now one of the most important pieces of infrastructure supporting the global financial market. The creation of the CLS Bank is also a shining example that demonstrates the power of private sector-public sector collaboration. The HKMA is proud to be part of that success story. 2  CLS reports both sides of an FX transaction.