This will diversify the use of currencies by importers and exporters. The use of domestic currency for settlement of trade reduces the exposures to currency risk and costs associated with the need to hedge against such risks. Collectively, these initiatives  4  BIS central bankers’ speeches  are expected to contribute towards further deepening trade and financial integration in the region. Priorities going forward With the developments described just now, in moving forward, we can expect the financial integration process to continue to gather momentum. To my own mind, an important question for policymakers and financial institutions is where should we focus our attention and efforts to adapt to the changes ahead? While further financial integration process has captured the imagination of many, because of the numerous benefits and opportunities, at the same time, policymakers in the region remain focused on ensuring strong and resilient financial systems which are critical to buffer against greater exposures to contagion in a more open and competitive market environment. Efforts continue to be taken to strengthen financial stability frameworks. This includes continuing to develop arrangements, both formal and informal, for cooperation in monitoring risks and to support the effective supervision and resolution of financial institutions with a significant cross-border presence. Greater consistency in the implementation of minimum regulatory standards will also be as important, to reduce distortions arising from unfettered competition, regulatory arbitrage and transactional compliance costs incurred when operating across borders.

Alberto G Musalem: International spillovers and policies Remarks by Mr Alberto G Musalem, Executive Vice President of the Integrated Policy Analysis Group of the Federal Reserve Bank of New York, at the People’s Bank of ChinaFederal Reserve Bank of New York Joint Symposium, Hangzhou, Zhejiang, China, 15 Mach 2016. *  *  *  Good morning. Thank you for the opportunity to speak here in Hangzhou about the important theme of international spillovers. By exchanging perspectives and experiences we can forge relationships and a shared understanding that can lead to better economic outcomes. I will focus mostly on the interaction of international spillovers with policy frameworks within and across countries. I will do this from the vantage point of a domestic economy experiencing foreign spillovers. I will then briefly turn to considerations from a U.S. perspective. As always, my remarks reflect my own views and not necessarily those of the Federal Reserve Bank of New York, the Federal Open Market Committee (FOMC), or the Federal Reserve System.1 International spillovers encompass a broad topic with respect to their sources and channels. Before narrowly focusing on monetary sources and associated channels, it seems appropriate to first take a broader view of the various sources. Foreign spillovers can emanate from monetary, fiscal, regulatory, currency or trade policies. Spillovers can also arise from endogenous productivity changes, from financial stability developments, and from a global financial cycle.2 The Mundell-Fleming logic remains relevant for thinking about policy options of open economies.