The possibility that the regional economies could be affected by global financial developments, as well as financial developments in countries within the region, creates a strong inventive for cooperation to create mechanisms that would pre-empt such adverse developments, and if they do occur, to limit their impact on the regional economies. You would have heard about the resource pooling under the CMIM as well as the regional swap arrangements. These arrangements exist. They have existed for a number of years. But too be truly effective, we need to be looking deeply at global developments and how they can potentially impact the region, and more importantly, vulnerabilities within the region that could have cross-border effects. This requires having a regional surveillance mechanism, and the ASEAN+3 policymakers have set up the ASEAN+3 Macroeconomic Research Office (AMRO) in Singapore to do exactly that. Would the regional mechanisms be better than the international mechanisms? It remains to be seen. We are still building these mechanisms, which provide us the opportunity to ensure that the bricks we put in place today will contribute to strong structures that would be able to withstand the demands placed on them in the future. In this respect, I wish to mention two points. First, we have to ensure that whatever regional institutions we set up must have strong governance. It would be unfortunate if after criticising the governance of existing international organisations we then end up replicating similar governance structures in the institutions that we set up in Asia.

Household saving is now rising rapidly from a negative level. Banks’ willingness to lend to households has stabilised after the tightening last autumn. However, they are still tightening lending to enterprises. Banks are increasing their margins and fees, and require higher equity capital levels of corporate loan applicants. At the same time, funding in the securities market is expensive. The Government Bond Fund facilitates funding primarily for enterprises with a moderate or high credit rating. As a result of extensive official measures the banks now have fairly good access to shortterm and medium-term funding. Norges Bank has supplied ample short-term liquidity to banks. Loans with longer maturities have been widely used, and an increasing number of banks are participating in the credit swap arrangement. We see here an overview of various banks’ and mortgage companies’ use of this arrangement as a percentage of their total assets. So far, there are 15 banks and mortgage companies participating in the arrangement. Several participants report that the credit swap arrangement is a good source of funding in today’s market. The government receives, which is reasonable, compensation for making Treasury notes available. The rate has been in the order of a half per cent. With a large volume of Treasury notes in circulation, we see the possibility of the formation of an interbank market for loans in NOK, where government securities are used as collateral. In the event, this would provide the Norwegian money market with greater insulation from the shifting weather conditions in the US dollar market.