The region is generating dollars and paying off foreign debt. Before looking ahead to 2000, let me conclude my review of 1999 by looking under the macro changes to see how the financial markets have been adjusting at a micro level. This is best reviewed by looking at what has been happening to the region's banks. Banks remain central to intermediating savings and investment flows in Asia. Local capital markets may be developing, but there remain many constraints, not least the limited local institutional investor base.
Banks remain central to Asian financial markets.
Generalising heroically, but I think fairly, Asian banks in 1999 have become less distressed and more transparent. NPLs appeared to have peaked around the region. While reserves and capital still need replenishing, the task appears less daunting than a year ago. Domestic capital markets have also provided a welcome source of capital as many Asian markets have seen surplus liquidity and falling interest rates. In line with the reduction in Asian credit spreads generally, spreads for benchmark Asian banks have tightened by over 250 basis points during the year.