The experience of Asia has clearly shown that adjustments through currency depreciation can easily get out of hand by setting off a financial meltdown, unless the process of currency depreciation is guided by exchange controls or credit restrictions. And, even then, the structural adjustments can probably only be postponed, not obviated. I hope that in pointing out these aspects of Hong Kong’s performance in the Asian financial crisis I have not given you the impression of being complacent or defensive. I am aware of the need to address such important issues as Hong Kong’s competitiveness and the provision of credit to small and medium-sized enterprises. But what I have mentioned are aspects which have, I fear, been very much neglected in the domestic discussions about Hong Kong’s performance in the financial crisis. But the fact of the matter is that, notwithstanding all the doom and gloom descriptions and predictions, and the death sentences that have been pronounced on our city, Hong Kong has performed reasonably well. The impact on Hong Kong of the Asian financial crisis has been severe. But we have stuck it out and, by and large, we have managed without catastrophes. Controversy It is true that we have had to take unconventional and controversial actions in the financial markets. But regulators do have a responsibility to deal with market failures, which in our case arose from market concentration and manipulation.
And even when such information disclosure requirements are successfully imposed in a particular market in a particular jurisdiction, and regulatory measures put in place, would there not be the danger of the market migrating offshore? Market participants are quite willing to take advantage of opportunities for disclosure or regulatory arbitrage that individual offshore centres may be keen in introducing so as to attract business. These are among the questions now being asked in international discussions. The task of achieving greater transparency in international finance is no doubt a difficult one, but it is in the interests of all developed and emerging markets - to support this initiative, to light up the dark room. And without going into the technical details, let me say this: with adequate international cooperation, involving all 5  BIS Review 120/1999  the significant financial centres, this is achievable. Regulatory authorities from these centres may just have to be a little more forceful. They could collectively say that these are the disclosure rules we have laid down on the basis of international consensus, under the auspices of an authoritative institution on international finance. * They could further emphasise that the disclosure rules are essential safeguards for systemic stability in international finance that is in the interests of all.