11 Moreover, domestic banks that compete with foreign banks exhibit more interest in introducing new accounting standards and financial reporting requirements, so that better quality of information on the companies financed allows them to extend more profitable loans. Domestic financial institutions are becoming more efficient, due the new technologies and best practice provided to the market by foreign companies. Integration of financial markets worldwide enables better risk diversification. Residents do not have to invest their savings in their own country and thus they are not exposed to the business cycle risk. They are free to invest in many countries and could obtain a better ratio of expected return to assumed risk. Globalization of financial markets also entails new challenges and threats. The lack of transparency, resulting from asymmetry, raises the risk of speculative bubbles and herd behaviour of investors. Uneven access to information in the global markets environment may lead to a negative selection in the financing of the enterprise sector and the moral hazard in a situation where the bankruptcy of a given institution would jeopardize the banking sector. 12 Economic reforms and opening the country to international trade in the emerging markets attract foreign capital, which, however, in the case of deteriorating economic situation, is withdrawn quickly. This invokes FX crises, which, as a result of an increase in interest rates, may turn into bank crises. 13 Additionally, international links of institutions and the speed of transmission of information among markets streamline the spreading of such crises over other economies.
12  BIS Review 60/2006  The hypothesis of the existence of an informal Breton Woods 2 says that a system has been established in which it is profitable for the Asian countries to finance the US current account deficit, because it enables them to increase their exports to this market. Thus, it supports the economic growth of the Asian countries and makes it possible for them to create new jobs, which is particularly important in China, where – according to various estimates – each year between 10 and 20 million of jobs must be created, due to migration of the population from rural areas to cities. In order to maintain the competitiveness of their exports, the Asian countries intervene on the FX market, thus preventing appreciation of their currencies. The purchased US dollars are invested in American bonds, and thus the American current account deficit is financed. Another hypothesis that explains the mechanism of occurrence of global imbalances has been formulated by the current Chairman of the Federal Reserve, Ben Bernanke. 29 His major concept is that the large US current account deficit cannot be explained solely by internal factors. In the opinion of Bernanke, external factors, which he has defined as the global savings glut, have played a key role. The hypothesis says that a significant surplus of savings over investments in the Asian countries, in combination with the structurally high savings in Germany and Japan, have caused the global savings glut.