Only one merger has taken place so far, between DBS and POSBank. But I know that all the banks are alive to the competitive trends, and are continually reassessing their position. It is a dynamic situation, and the present configuration is unlikely to be permanent. Regulatory cooperation and harmonisation The second dimension of financial integration is the trend towards greater regulatory cooperation and harmonisation. Starting in the 1980's, a series of international fora were created for regulators and policymakers to share experiences, cooperate with one another, and harmonise regulations and  2  BIS Review 45/2001  policies. Among the multilateral initiatives, the efforts of the Basle Committee and IOSCO are probably the best known. The Basle Capital Accord of 1988 helped to increase the capital held by internationally active banks, and to create a more level playing field for banks under different regulators. The new Basle standards now being finalised will remedy the weaknesses of the 1988 Accord, and enable banks to set aside capital in accordance with the riskiness of their assets. IOSCO has provided securities regulators globally with a useful platform to exchange views and enhance cooperation on issues relating to the regulation of the securities markets. It has developed a common set of objectives and principles of securities regulation, which enhance mutual understanding among securities regulators and commissioners. IOSCO has also been actively involved in promulgating standards of public disclosure, and facilitated cross-border capital raising and listings. The Asian crisis has added impetus to the harmonisation of regulatory standards.

Lee Hsien Loong: Building one financial world Address by Mr Lee Hsien Loong, Deputy Prime Minister of Singapore and Chairman of the Monetary Authority of Singapore, at the 42nd ACI World Congress, held in Singapore on 25 May 2001. *  *  *  Managing financial integration: Asia’s experience The last 25 years has seen the emergence of an increasingly borderless, integrated financial world. The collapse of the Bretton Woods system set in train the deregulation of domestic financial markets and the removal of barriers to cross-border finance. Overall, the outcome has been positive. Globalised financial markets have helped to integrate national economies into a global trading system, and finance growth through better allocation of world savings. But the benefits have not come without hazards. Shocks are now transmitted quickly from one financial system to another. Large speculative flows threaten to destabilise economies from time to time. The margin for policy error is narrow, and the penalty severe. One consequence of greater financial integration is that countries can no longer count on sound macroeconomic fundamentals alone to attract foreign capital. When deciding whether to lend or invest and at what price, international players increasingly look to the stability of countries' financial systems, the degree of transparency, the quality of the legal framework and the standards of corporate governance. On these counts, Asia has much catching up to do. For too long, East Asian countries directed their domestic banks to lend to well-connected familybased firms and conglomerates.