More and more Mainland banks plan to expand their business or establish their branches in Hong Kong as they recognise that there is no other place like Hong Kong that offers a suitable and world-class operating, regulatory, legal and professional environment and serves as the springboard and bridge for Mainland banks and financial institutions to “go global”. This is also why the majority of overseas direct investment from China is made through Hong Kong. In the past decade, overseas direct investment from China has been on the rise and reached $ billion in 2008, of which 70% was invested in Hong Kong or in other countries through Hong Kong. Thirdly, Hong Kong may play a role in promoting RMB as an international currency as well as in promoting the circulation of RMB outside the Mainland. Since there have been many discussions and coverage of this topic recently, I am not going to elaborate here. Nevertheless I would like to emphasise that Hong Kong is an international financial centre and with the implementation of the “one country two system” policy, Hong Kong is closely linked to the Mainland in history, culture, and the flow of people, goods, capital and information, distinguishing us from all other places outside China. Hong Kong also enjoys the advantage of being a “first mover”. We began to develop personal RMB business in 2004 and started to develop RMB bond market in 2007. During this period, Hong Kong has established a highly efficient and secure RMB settlement platform and payment system.
I would not wish to conclude these considerations on the growing importance of the European component of our financial system without referring in particular to the euro area financial market. Indeed, financial integration is even greater for the European countries making up the euro area: their banking systems draw on a common pool for their funds, through bank loans, medium-term financing  BIS Review 67/2007  7  (whether subordinated or not), securitisations and mortgage covered bonds. The existence of this integrated market for the euro area has allowed certain financial systems in the area to finance their economy’s upturn with the funds from other financial systems operating with less pronounced cycles. This is a most favourable development as it allows financial institutions with surplus funds to earn more efficient and higher returns, thereby sustaining the profitability of their business, while providing demanders of funds with more stable financing for their most profitable lending business. Evidently, the outcome for the euro area economies is a more efficient use of financial resources, which are routed towards the most productive activities. Let me now analyse in greater detail the situation of Spanish deposit institutions. As earlier stated, their banking activity grew notably in 2006 both as regards lending to corporations and to households. This sizeable increase in activity is one of the reasons behind the highly favourable earnings performance of Spanish institutions. However, if activity were to slow in the future, income statement margins might suffer.