Rather, the current emphasis is on promoting an informal grouping of central banks called EMEAP (“Executives’ Meeting of East Asia and Pacific Central Banks) which is exploring opportunities for cooperation in areas such as payment systems, reserves management and banking supervision. Among other things, this may provide the opportunity over time to develop a more distinctive and focused regional voice on international supervisory issues. Consolidated supervision I will now return to the topic which I raised at the beginning of my speech, which is how we view consolidated supervision from the receiving end. I suppose that it goes without saying that we are in favour of the concept of consolidated supervision. As an international financial centre, we are vulnerable to adverse developments in banks abroad and we rely heavily on the consolidated supervision of the supervisors of those banks. The ability to conduct consolidated supervision is a key factor in whether we regard the home supervision of a particular bank as adequate - which is one of the criteria for granting a banking licence in Hong Kong. Within the legal framework in Hong Kong we try to cooperate with overseas regulators to ensure that they can effectively undertake consolidated supervision. In particular, we allow home supervisors to carry out on-site examinations of their institutions in Hong Kong subject to obtaining our prior consent - which we have not hitherto withheld.
That reflected continuing strong demand growth in the emerging market economies coming up against inelastic supply, augmented in the case of some foodstuffs by the development of bio-fuels and poor harvests. Of course, you have experienced many of these developments at first hand. This time last year, DEFRA’s measure of farm-gate prices had risen by 25% over the preceding twelve months, while the Economist food index had increased by around 55%. For much of last year, the MPC sought to balance these two forces: the turmoil in financial markets, pushing down on growth and inflation; and the rise in commodity prices, also pushing down on growth, but up on inflation. The latter proved to be the dominant force through the first part of the year, pushing CPI inflation up to 5.2%, well above our 2% target. Then, in September, an economic winter of unusual severity arrived. The global economy experienced the equivalent of Jevons’ sunspot – the collapse of Lehman Brothers. Investors  BIS Review 19/2009  1  had assumed the US authorities would never allow a bank the size of Lehman’s to fail. The resulting shock fatally undermined confidence in a number of similar institutions. You will remember the period in early October when bank share prices fell precipitously and a number of financial institutions around the world were rescued or closed.