As industrial and emerging countries continue to strengthen their own regulatory standards, financial market participants may relocate their operations to offshore financial centres to take advantage of relatively lax regulatory standards. It is thus important for offshore financial centres to strengthen their supervisory systems and standards. To encourage these centres to comply with international standards, various measures could be considered. For example, higher risk weights could be applied  5  BIS Review 47/1999  to counter-party transactions for banks doing business with a financial entity operating out of an offshore jurisdiction that does not comply with Basle Core Principles. Conclusion Taken together, the three approaches could result in quite an extensive overhaul of the international financial architecture and a great deal of co-ordination on the international front. This is no easy undertaking, and the nature of the problem means that the process of reform needs to be both comprehensive in market coverage and inclusive in the involvement of interested parties. Crossborder speculative attacks target the vulnerabilities and weaknesses of particular economies and thrive by exploiting the gaps and inconsistencies between jurisdictions. It is therefore essential that emerging markets, and not just the big industrialised economies, are involved in the reform process. Emerging markets have been most affected by the volatilities of the last couple of years, and their experience is crucial for the formulation of workable policies: they have a different perspective of events and different needs from those of the larger, industrialised economies.

The ADB, one of the sponsors of this forum, has played a vital role in nurturing growth and technical advances in Asian economies, and this role has in recent years both deepened, in the assistance it has been offering, and broadened in the geographical scope it has been covering. The ADB’ s joint sponsorship of this forum is one of many examples of the good work it is doing to address regional concerns. The co-sponsor of the forum, the Institute of International Finance (IIF), has, in two timely and important reports issued in March this year, argued strongly for private-sector, as well as publicsector, initiatives to address global financial crises. The co-sponsors have brought together a diverse and experienced forum of participants from private-sector and public-sector organisations, all of which have a large stake in ensuring that our regional and global financial systems work properly. The Hong Kong Experience As a regional and international financial centre, Hong Kong’s livelihood depends, perhaps to a greater extent than other economies, on the proper functioning of the international financial system. Our stake in this, arguably, is larger than other economies. This perhaps explains why we seem to have been quite forthcoming, in both our views and our actions, on issues affecting international monetary and financial stability. This unusual stance has caused some controversy, particularly when we intervened last summer in the stock and futures markets to deter market manipulation and correct market failure.