This data access will provide new ingredients for innovative banks to create new products or processes which will allow thousands of small and medium-sized enterprises to access bank credit in an easier and cheaper way than before. 45. We’re also looking to apply new technologies to addressing long-standing pain points in banking. Take international remittances for example. The process is currently slow and costly. Along with the Bank of Thailand, the HKMA initiated a central bank digital currency project for cross-border payments that has now been joined by the central banks of the United Arab Emirates and China. This ‘m-CBDC Bridge’ project is exploring the potential of using blockchain technology to facilitate real-time cross-border payments, which could reduce costs and enhance transparency for users. CBDCs have a range of promising applications and, together with our partner central banks, we want to be at the forefront of this development. Enhancing the Platform 46. We understand that a supportive regulatory environment matters a great deal to the providers and users of financial services. That’s why the HKMA and other financial regulators are working closely with the Government to keep enhancing the attractiveness of the Hong Kong platform. We keep our market infrastructure, legal framework, regulatory regime and tax system under constant review to make sure that they are business-friendly, forward-looking and competitive. 47. In recent years, we’ve been undertaking reforms that provide modern legal structures catering to the evolving needs of the asset management industry.
Thus not only does the price of gilts rise as a consequence of the Asset Purchase Facility’s initial purchases, but also the prices of a whole spectrum of other assets. That in turn lowers the cost of non-bank finance and encourages increased corporate issuance. Also the rise in asset prices increases wealth and improves balance sheets. In this way, Quantitative Easing helps to work around the blockage created by a banking system that is still undergoing a process of balance sheet repair. That is exactly what we have seen since the Monetary Policy Committee started its asset purchase program. Gilt yields fell sharply, though they have subsequently risen and fallen again (Chart 2). But gilt yields can move for a variety of reasons, including changing expectations of future interest rates. If we control for that by comparing gilt yields with a measure of market expectations of the future level of Bank Rate (Overnight Indexed Swap rates for an equivalent maturity), we find that this spread has fallen by around ¾ percentage point (Chart 3). Moreover, no such movement is observed in either the United States or euro  1  That is in contrast to the related policy conducted by the Bank of Japan in the early part of this decade, which was instead directed at purchases of Japanese government debt held by the banking sector. 2  BIS Review 126/2009  area, which strongly suggests that the movement may be related to our gilt purchases 2 .