When the crisis struck Asia in 2008, there were fears of a drying up of trade finance as European banks started deleveraging and cutting back from the region. As it turned out, Asian banks stepped in decisively and trade finance volumes recovered strongly. •  Between 2008 and 2013, trade finance volumes at Chinese and Hong Kong banks have more than doubled while those at Indian banks rose more than half over the same period. •  Eurozone banks have since recovered some of their market share, but the Asian banks remain significant players. This afternoon I would like to discuss three key forces that will shape the course of banking and finance in Emerging Asia over the medium term: •  economic growth;  •  financial regulation; and  •  technological innovation. Economic growth Let me begin with growth. The near term economic outlook for Emerging Asia will be shaped by two themes: the ongoing recovery in the G3 economies and the slowdown in the Chinese economy. •  The underlying growth momentum in the US appears intact despite a disappointing start to the year. BIS central bankers’ speeches  1  •  The Eurozone is recovering from a double dip recession and financial stresses have abated. •  In Japan, domestic demand is strengthening, following the negative consumption tax shock of last April. •  However, China, which had been supporting global demand in recent years, is experiencing a deceleration in growth amid a property downturn and softer exports.
Norwegian banks and mortgage companies are now also entitled to issue mortgage-backed bonds. The rules for covered bonds entered into force on 1 June 2007. Norwegian covered bonds are very different from US CDOs backed by subprime mortgages. The regulations ensure that Norwegian covered bonds are a more transparent and substantially more secure investment alternative. Norwegian mortgages have a maximum loan-to-value ratio of 75 per cent. In addition, all holders of covered bonds have the same claim over the cover pool. A number of conclusions can be drawn from the turmoil in credit and money markets. Problems in markets far beyond Norway’s borders may have an impact on Norwegian banks even if the banks are not directly involved. As a result of the globalisation of financial markets and new and complex instruments, turbulence spreads quickly. Banks extend long-term loans. They should therefore be cautious about basing borrowing growth on short-term financing. They should ensure access to a solid local deposit base or long-term bond issues for any expansion. BIS Review 115/2007  9  When times are good, it may be difficult to perceive and assess risk. New products that are dependent on favourable economic developments are not viable. New products must be robust to slowdowns and unforeseen events. The housing market in Norway and the financial position of households The recent turbulence originated in the US housing market. It may be interesting to compare with developments in the housing market in Norway and in household saving and investment decisions.