This provided a stimulus to major reform of the banking law and to improvement of supervisory standards, a process that has continued to this day. BIS Review 53/1999  2  We should not however allow the relatively better credit performance of Hong Kong during the crisis to lull us into a sense of complacency. Much of the blame for the rise in bad debts in Hong Kong can indeed be laid at the door of the recession, as is shown by the rise in nonperforming loans at even our best-managed banks. But it is also possible to argue that the rise in bad debts has been accentuated by certain weaknesses in the credit environment during the 1990s. What sort of things am I talking about? As Alan Greenspan has suggested in his usual oblique manner, the period prior to a financial crisis is often characterised by “over-exuberance”. Hong Kong in the years prior to the Asian crisis was no exception. The mood of the times was well captured in a magazine article from 1997: “Prospects couldn’t have been rosier. In the early 1990s, the stock market was booming. China’s economic reforms were in full swing, opening up enormous opportunities for the risk-takers. Liquidity was abundant, corporate bankers were eager to lend and listed companies were keen borrowers.” In such a mood of euphoria, it is typical that too much money is borrowed from too many banks.
In Germany, as in other euro are countries, there were and are forces in disagreement with the Monetary Union, analysts and economic agents who considered the break-up of the euro as likely. But what counts is what the German Government’s position was and its support, at key moments, to save the Monetary Union and the euro, its support to the programmes for stressed countries and the Banking Union process. Rather, we can say that the new hegemon is the culture of monetary and fiscal stability that has gained in strength over the course of the crisis. The strengthening of the institutions and of the rules to ensure fiscal stability is essential for maintaining the stability of the Monetary Union and of the euro. This is because, as we all know, the source of the Monetary Union crisis lay basically in certain countries’ fiscal performance, even more so than in the banking crisis which has also affected – to differing degrees of intensity – virtually all the euro area members. 2  BIS central bankers’ speeches