It would also be conducive to the stability and integrity of the financial system. I would emphasise the word “international” as there is no reason to develop regional standards different from those that have already been developed by international financial institutions and professional bodies, together with supervisory agencies. 17. The fourth element concerns the strengthening of co-operative efforts in financial system development. As I have already noted, in Asia we have been making good progress in our efforts to develop the domestic and regional debt markets through various regional forums and involving the international financial institutions. In the context of developing Asian Bond Fund 2, for example, we have achieved a few firsts, including the introduction of the first exchange-traded bond index fund in Asia, arranging for two Asian markets to allow exchange-traded funds for the first time, and opening up the renminbi inter-bank bond market for the first time to foreign investors. 18. The final, and probably most difficult, step towards creating an integrated Asian financial market involves the relaxation of statutory restrictions on cross-border capital flows. It is likely to be the most difficult, in part because it depends on the ability of the financial system in individual jurisdictions to cope with the ensuing risks. 19. This last point brings me to the next issue I wish to touch upon in my remarks, namely, the need for a strong and efficient regulatory framework that is adapted to the integration of the domestic financial system with that of other jurisdictions. 20.
Joseph Yam: Financial integration and regulation Remarks by Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the conference: The Euro: Lessons for European and Asian Financial Markets, Hong Kong, 24 February 2006. *  *  *  Ladies and Gentlemen, 1. It is a great pleasure for me to open the proceedings of this conference on “The Euro: Lessons for European and Asian Financial Markets”. It is also an honour for the Hong Kong Monetary Authority to be co-sponsoring this event with the European Commission. The programme is a very rich one and it will be impossible for me, in these opening remarks, to cover all the topics to be discussed later this morning and in the afternoon. I do notice, however, that the words “financial integration and regulation” appear in several of the session titles. These are topics close to my heart, because I have come to believe that they can influence profoundly how Asian economies develop in the years ahead. Well managed financial integration, combined with sound regulatory practices, can help the region maximise its economic growth potential while maintaining financial stability. I have chosen therefore to focus on these topics. 2. I will try and lay out a case for closer financial integration in Asia, both as a means of achieving more efficient allocation of resources in the region, thereby contributing to continued economic growth, and as a means of supporting financial stability.