Eddie Yue: Global Loan Market Summit Keynote speech by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, at the Asia Pacific Loan Market Association (APLMA) Global Loan Market Summit, Hong Kong, 1 March 2023. *** Pedro, Andrew, distinguished guests, ladies, and gentlemen, Good afternoon. It is a great pleasure to be here. 1. First, I'd like to congratulate the Association on its 25thanniversary this year. A quarter century of valuable work in promoting growth, liquidity and best practice in syndicated loan markets in the Asia Pacific region is truly a significant milestone. We are all grateful for your invaluable contribution. 2. I am glad to see this event returning to Hong Kong in physical format after three years of virtual meetings. Alongside other recent large-scale events such as the Global Financial Leaders' Investment Summit and the many more that are planned, it is a strong vote of confidence in Hong Kong as an international finance centre. In recent months, as travel has largely returned normal, I have been meeting lots of overseas and mainland friends, and from my face-to-face interaction with them, I sensed great excitement and faith in Hong Kong's comeback. 3. 2022 was a difficult year for the global and local loan markets. Geopolitical conflicts, rising inflation and interest rates have put pressure on the performance of almost all asset classes. Bond and equity markets both fell sharply, and new bond issuance collapsed. Notwithstanding all these challenges, we saw continued strength in the loans market.

If fiscal policy is systematically too expansionary during booms and when petroleum revenues are higher than expected, Norway will in periods experience pressures in the economy and rising price and cost inflation. This will often give rise to situations where the krone depreciates, thereby undermining the credibility of our monetary policy. There is a price to be paid for this. Market participants will lose confidence in the krone and demand a higher interest rate for maintaining krone positions rather than switching to other currencies. The result is a permanently higher interest rate level in Norway compared with other countries. Intricate relationships Earlier, monetary policy was based on extensive use of interventions – in other words, purchases and sales of foreign exchange in order to defend the krone exchange rate. Denmark has used this instrument with positive results. There are probably many reasons for this in addition to its stable terms of trade. For instance, fiscal policy in Denmark has on numerous occasions made a substantial contribution to exchange rate stability. Over time our experience of large-scale and persistent interventions has been mixed. When the central bank intervenes heavily to defend the krone, market participants may easily move into a game situation and perceive central bank intervention as an interesting opportunity to make a profit. Market operators know that a situation in which the krone is being propped up only because Norges Bank is buying kroner cannot continue. It is then tempting to take reverse positions in the foreign exchange market in relation to the central bank.