Lee Hsien Loong: Post crisis Asia - the way forward  William Taylor Memorial Lecture by Mr Lee Hsien Loong, Deputy Prime Minister of Singapore and Chairman of the Monetary Authority of Singapore, before the Eleventh International Conference of Banking Supervisors, held in Basel, 20-21 September 2000. *  *  *  Introduction Three years have passed since the Asian crisis struck in 1997. The crisis showed how unstable the international financial system could be, and how vulnerable apparently strong Asian economies were to a sudden shock. It has caused a searching reappraisal of the benefits and risks of globalisation, as well as the strengths and weaknesses of the Asian economies. I propose to discuss how attitudes towards globalisation have shifted, and what challenges Asian economies face in remedying the weaknesses uncovered. When Mr Paul Volcker, Chairman of the G30, invited me to deliver the William Taylor Lecture to this distinguished gathering of banking supervisors, he asked me to share Singapore’s experience in dealing with the financial turbulence. I will also explain how we are reforming and liberalising our financial sector, to benefit from globalisation while protecting ourselves against mishaps. Not all the lessons Singapore has drawn will apply to other economies because of differing circumstances. But I hope Singapore’s case will illustrate the importance of basing financial reforms on a realistic appreciation of the risks and difficulties. In analysing the Asian crisis, and in describing the Singapore experience, I will be underlining the importance of sound banking systems and strong supervisory oversight.

That said, there are measures that should be studied to reactivate credit for the entire economy and, in particular, to SMEs and to the exporting sector. The European Investment  4  BIS central bankers’ speeches  Bank has the means to stimulate loans to SMEs through an increase in its funding to European public-sector banks operating in this area. New arrangements could also be studied for risk-sharing using European funds, for example structural funds, a possibility that is already under discussion. And specific schemes to boost export credit could be studied. Within the Eurosystem, the Banco de España has always been in favour of initiatives geared to supporting more and cheaper credit, through unconventional monetary policy measures that help restore the monetary policy transmission mechanisms. But we know that the normalisation of credit will not come about, or will be slower and difficult, if we do not complete the clean-up and reinforcement of the solvency of our banking system. This is why it is important to clearly understand what has been done in 2012 to overcome the crisis and to evaluate the current state of affairs. Clean-up, recapitalisation and restructuring of the banking system and financial reform I shall focus on the six issues that afford us an overview of the situation: the clean-up efforts in 2012, the strengthening of solvency, the improved liquidity position, developments in nonperforming loans, expectations for results in the current year, and, finally, regulatory changes approved in 2012. Clean-up Firstly, balance sheet write-downs.