Considerable efforts have also been placed in regional financial market development, especially for a deeper and more liquid secondary bond market. On the supply side, the Asian Bond Market Initiatives (ABMI) seeks to develop deeper and more liquid capital markets that facilitate the channelling of the large pool of savings in the region to fund productive investments, thereby enabling further regional economic development. Recently, the establishment of a Credit Guarantee and Investment Mechanism by ASEAN+3 to support the issuance of local currency-denominated corporate bonds, with an initial capital of USD500 million, was announced. Meanwhile, the Asian Bond Fund (ABF) Initiative focuses on addressing demand-side issues by broadening and deepening domestic and regional  BIS Review 130/2009  7  bond markets through pooling reserves for investments into regional bond markets. Two funds, totalling USD3 billion, have been established to catalyse market development. Regional financial integration has accelerated in this decade. A more diversified financial system, together with strengthened financial infrastructure and capital account liberalisation, have seen the share of intra-regional portfolio investment, in both debt and equity, as a share of total portfolio investment has increased to 24% in 2007 from 15% in 2001. Mergers and acquisitions (M&A) have also been growing, with intra-regional M&A as a share of total M&A in the region rising to 47% in 2006 from 32% in 2004. Most of the investments were into the services sector, such as financial services and real estate.
The last time this was done was back in 2003. There are expectations that the new ECB leadership will initiate such a review. What effect do the low interest rates have on the Bulgarian economy? The immediate effect is positive. The increased credit activity is one of the indicators for this. Such a development, however, is connected with some serious challenges, for Instance the profitability of the banks as a result of the diminishing interest margins. I should say that so far the Bulgarian banks manage to deal with this challenge. Cyclical risks are also accumulating, due to which BNB activated and subsequently increased the level of the countercyclical capital buffer for banks. In recent years we have seen a few large deals in the Bulgarian banking system. Do you expect the consolidation to continue in the future? Is it a completely positive phenomenon? Consolidation is one of the possible responses to the challenges facing the banks. I expect this process to continue. 3/3  BIS central bankers' speeches