I believe this is one of the main reasons why X in T+X in the settlement of some financial transitions is still a number other than zero, or why T+X is still not replaced by RTGS DVP even though the technology to do so has been available for some time. Very simply therefore there is a case for the authorities to get involved, as a developer or a service provider, when a private sector solution that is in the public interest is not available. And the public interest is not just in the enhancement of financial efficiency but also in the limitation of contagion and the more effective achievement of financial stability. The Hong Kong Monetary Authority has devoted much effort to the building of the financial infrastructure of Hong Kong. I can assure all of you that it is well worth the effort and the amount of public money involved is really quite modest, although it may take a little time, and some appropriate prudential guidance concerning, for example, the management of payment and settlement risks, to convince potential users before traffic in these financial highways builds up. Allow me to end this address with an advertisement. In Hong Kong we now have RTGS systems for the Hong Kong dollar, the US dollar, the euro and the RMB. They are all linked together to achieve cross-currency PVP in our time zone and they are linked up with our debt-clearing system to achieve DVP.
In a slowly developing crisis there is time to prepare action, which may even include new legislation, for instance on bank resolution. BIS Review 58/2003  3  To detect such a crisis may sound easy, but is in practice very difficult. For instance, when does a gradual increase in asset prices actually turn into an unsustainable bubble and no longer constitute a reflection of fundamental values? Look at the housing markets in some countries around the world right now. Are there bubbles and, if so, where are they? Another problem is timing. At what point should the central bank sound the warning bell? By acting too early, we might add to the volatility in the market place and hence worsen the situation. Remember that the central bank will be held accountable for the negative repercussions of pricking the bubble, not only for the potential but less tangible benefits of having done so. By acting too late, on the other hand, we do not fulfil our mandate and a full-blown crisis might not be prevented. In addition to the problem of timing, there is the problem of selecting an appropriate response to the threat. The first line of defence is moral suasion, i.e. trying to convince the banks and other market participants to act in a proper fashion. The problem with moral suasion is that it may be difficult to calm a market that is rushing to new heights.