Asian financial officials tackle global stability

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Sunday, April 27, 2014


ASIAN financial policymakers convened in Cebu on Friday to discuss financial stability.

Among the key discussions include the implementation of global financial standards, managing risks from “too big to fail” banks and preparation for natural disasters.

“The discussions today focused on specific initiatives in collective pursuit of global financial stability,” said Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. in a media briefing at the end of the 6th meeting of the Financial Stability Board (FSB) Regional Consultative Group for Asia (RCGA) in Shangri-La Mactan Resort and Spa.

Tetangco said they had a “full day of critical issues” and discussions that concern the financial stability of the region. Tetangco co-chairs the FSB RCGA.

The FSB is an international institution established to coordinate the work of national financial authorities and international standard-setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies for financial stability.

Masamichi Kono, vice commissioner for international affairs at the Financial Services
Agency (FSA) of Japan, said they discovered many points on which Asian countries share common views in the implementation of reforms being undertaken in the global level.

Diverse region

“Asia is truly a diverse region with different stages of development but we still have many common issues,” said Kono. “We had discussions on the issue of financial regulations and supervision. Though, this is not a place to decide on any agreement...the discussions can contribute in attaining financial stability in the region.”

Kono discussed the importance of having an orderly exit of “too big to fail” banks to minimize negative impacts to host countries.

“There is a need to address the issue of too big to fail institutions or globally systemically-important banks (SIBs). Like how when those institutions find themselves in difficulty, we should avoid the use of taxpayers fund to bailout those institutions,” he said.

He explained while only China and Japan are home to globally SIBs in Asia, almost all of the countries in the region are host to a number of these institutions.

“It’s now being strongly recognized that for globally SIBs, not only the home countries will have to be comfortable with orderly resolution but also everyone that will be affected,” Kono said.

The monetary and fiscal policymakers also included in their meeting the contingency planning for the financial sector in times of natural disasters.

Recent calamities in Japan and the Philippines served as case studies, from which members considered lessons learned and plans that could be put in place to mitigate the impact of future events on the financial sector.

Technology

“Preparation helps, also the use of new technologies such as mobile payments, cloud computing and the importance of having backup sites was also cited. There were also discussions on difficult decisions such as should financial authorities reopen the market immediately after natural disasters?” said Kono.

He said preparation is a key given that disasters have increased over the years.

Tetangco said the readiness to comply with the global financial standards across the region is evident. But he noted there is also a need to recognize that countries in the region are in different stages of development.

“We need to find a way to be able to meet the requirements under this global standards,” said Tetangco.“What we found is that it would be useful for countries to have a roadmap to prioritize reforms in as far as their jurisdictions are concerned.”

Stimulus program

Tetangco also warned that countries should continue to be more watchful of the potential risks of the US Federal Reserve’s ongoing tapering of its massive stimulus program.

“We noted the difference between then and now is that the tapering has actually started...the impact based on the observations...looking at how different financial systems in the jurisdictions have responded, so far so good,” said Tetangco.

“But we are not saying that there is no risk. We should continue to more watchful for the potential impact.”

Published in the Sun.Star Cebu newspaper on April 28, 2014.

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