Stability on the playing field was restored, and Hong Kong remains an open market, and, we believe, like the Rugby Sevens, attractive to participants from all over the world who are keen to play a fair game. 22. We have been taking another look at the rules of the market to ensure that its free workings receive the best safeguards possible. The reforms include the currency board measures, now in place, and the proposed reorganisation of the securities and futures markets that I have already mentioned. It has to be stressed, however, that there is a limit to what can  BIS Review 35/1999  6  be done locally in an international financial system that still lacks international forms of regulation. There is consensus that some international action is now needed to build a global financial architecture that can cope with volatile fund flows more effectively than can individual jurisdictions on their own. Various international agencies and forums have been grappling over the last six months with this issue, and Hong Kong, with its direct experience of speculative attacks, has been pushing as hard as it can for an internationally backed and non-intrusive system of disclosure and indirect regulation of cross-border fund flows.
I shall come to this episode later on. But first I should like to go a little more deeply into the characteristics of international capital flows. I shall then discuss the implications, practical and philosophical, that they have for free and open markets, which collectively make up an increasingly seamless international financial system, but which continue to rely largely on their own limited resources when they encounter the problems that this system throws up. International capital flows 4. Like wind currents and weather patterns, international capital flows carry with them a mixture of benefits and risks. Let me try briefly to pin down what makes them so powerful and so protean in their effects on the international financial landscape. I find it helpful, as a mnemonic, to think of their main characteristics in terms of what I shall refer to as the six ‘V’s: Virtue, Volume, Variety, Velocity, Volatility, and Viciousness. 5. By Virtue, I mean simply that international capital flows, by promoting an efficient and balanced use of financial resources, bring enormous benefits throughout the world. Over the past few decades they have been of crucial importance in developing new economies and revitalising old ones. When they work smoothly, international capital flows help to relieve shortages of capital in previously segmented markets. They provide a competitive environment that encourages innovation. And, by affording better returns to investors, they help to put spare capital to the best possible use.