The initiative will, as a start, place focus on four broad areas, namely: (a) legal, regulatory and supervisory framework, (b) risk management, (c) liquidity enhancement, and (d) market infrastructure for trading, clearing and settlement. The Asian Bond Market Initiative also encourages technical cooperation amongst ASEAN and the plus 3 countries of China, Japan and Korea. Profiling Asia Secondly, profiling Asia. More than 6 years have passed since the Asian financial crisis. Most Asian economies have fully recovered. Confidence has returned and growth momentum restored. Asian countries can continue to engage international investors at an individual country level. There are, however, merits to working together to profile Asia in a more concerted manner. A collective effort will have greater pulling power and generate far greater interest from investors. The region has taken large strides in stepping up the pace of reforms since the Asian crisis. It is perhaps timely for regional governments to join hands and raise the profile of the region. As a start, the ASEAN countries have agreed at the recent ASEAN Finance Ministers’ Meeting to organise efforts to profile ASEAN better. International investors can then have the opportunity to appreciate more fully the progress and reforms ASEAN economies have made since the Asian crisis. 2  BIS Review 22/2004  Exchange alliances Thirdly, extending regional collaboration to the exchanges. The region can derive greater benefits by working together. The successful launch of Asian Bond Fund I and the impending launch of Asian Bond Fund II clearly demonstrate this.

The FOMC similarly committed to keep the US economy growing, with state-contingent forward guidance being issued in December 2012. The MPC had voted to increase its stock of asset purchases to £ billion in July 2012 and introduced the Funding for Lending Scheme (FLS). Taken together these factors were generating a growing “hunt for yield”, initially cautious and focussed on relatively simple, liquid financial instruments but gradually expanding, especially in terms of credit risk – for example “high yield” bonds were in particularly high demand, leading to historically compressed spreads. Since then, we have seen a game of two halves. If I move on to around April this year, the picture had changed substantively relative to the autumn. The previously perceived tail risks were fading from discussions. Europe was making progress on a number of structural reforms, including moving towards a banking union. A mini-crisis in Cyprus had been dealt with, without too many spillovers. Spreads over bunds for sovereign debt of the larger vulnerable euro-area economies had narrowed considerably. The US “fiscal cliff” at end-2012 had passed by with some relief (although concerns about the processes associated with the US fiscal deficit have now resurfaced). While fiscal consolidation might have slowed US growth somewhat, the process of adjustment around the turn of the year had been smoother than feared and the macroeconomic repercussions rather less. China had injected some renewed stimulus and Japan had introduced a far reaching new economic framework of quantitative and qualitative easing to improve the outlook there.