eddie yue : developing local - currency bond markets in asia statement by mr eddie yue, deputy chief executive of the hong kong monetary authority and head of the delegation of hong kong, at the 45th asian development bank annual meeting, manila, 4 may 2012. * * * i would like to thank the government of the philippines for hosting the 45th annual meeting of the asian development bank ( adb ). i would also like to congratulate adb on the successful conclusion of the tenth replenishment of the asian development fund ( adf xi ), which would provide critical resources to adb to further its work in poverty reduction in asia. the global economy has shown signs of improvement in 2012 following a marked slowdown amid the intensification of the euro zone debt crisis in the latter part of last year. nevertheless, significant downside risks remain, with the euro zone debt crisis yet to be fully resolved and rising oil prices adding further uncertainty to the recovery outlook. asia has remained resilient so far, in large part attributable to the reforms taken by regional economies over the years to strengthen economic fundamentals, improve fiscal discipline and enhance the resilience of their financial systems since the asia financial crisis. nevertheless, the region is not immune from the lingering fragility in the global environment. to date, the deleveraging by european banks has not caused significant short - term credit tightening in asia, with banks in the region and elsewhere having stepped in to fill the gap left by european banks. however, the ability of asian banks to continue to take up the slack could be constrained by the already high loan - to - deposit ratio and limited access to us dollar funding. more importantly, it is doubtful whether these non - european banks would have the appetite to take up long - term project and infrastructure financing, which is a specialised business traditionally dominated by the european banks. any cutback in infrastructure financing could have serious repercussions for developing asia, which has a strong need to build and upgrade infrastructure networks to promote sustainable growth, create employment opportunities and boost competitiveness. adb estimates that asia requires as much as us $ 8. 3 trillion in overall infrastructure investment between 2010 and 2020, with an average of us $ 750 billion in annual infrastructure spending. it is therefore vital to further develop the capital markets in asia, in particular the local - currency bond markets, to effectively channel the region ’ s vast savings to meet its huge demand for infrastructure financing. asian governments have been making

to core supervisory risks, bank management may be distracted from key risks. it is essential that supervisors focus on key and critical issues. we have seen a significant number of regulatory and guidance changes this year compressed into a very short time frame. these changes do not appear to be prioritized based on known shortcomings or deficiencies in our existing regulatory framework. several of the rules i just discussed demonstrate that we have missed the mark on prioritizing our regulatory agenda. instead, some of our actions could distract bank management from focusing on important and key risks. the board's new climate guidance is emblematic of this, but it is not the only example. while climate change is an important issue, climate change is not a core risk to the safety and soundness of financial institutions. the lessons learned from supervisory failures during the bank stress in the spring clearly illustrate that bank examiners and bank management should focus on core issues, like credit risk, interest rate risk, and liquidity risk. i am concerned that focusing our regulatory reform and guidance efforts on issues like climate change that do not represent core banking risks will only serve to further distract bank management and supervisors. finally, regulatory reform can also pose significant financial stability risks. the cumulative effects of recent proposed and final rules remain to be seen, but these significant regulatory changes could present ongoing risks to the health of certain institutions and the u. s. banking system. many of the rules will be costly and burdensome to implement and are not based on any identified deficiencies in our regulatory toolkit. for example, the basel iii proposal increases capital for the largest banks, but there has yet to be a data - driven analysis demonstrating that capital levels in the banking system are currently deficient or improperly calibrated. in addition, while the cra serves a tremendously important purpose, there was no urgency to finalize this rule at a time when we have yet to fully address potential shortcomings in our regulatory and supervisory tools stemming from the banking stress earlier this year. conclusion the recent volume and materiality of new reforms implemented and under consideration by the federal banking agencies is significant. the rules and guidance total over 5, 000 pages since july. while the unintended consequences of these reforms may not be clear at the outset, our ability to predict these consequences is even more limited when the reforms overlap or conflict. the sheer volume of change presents significant challenges for banks, who will be required to prioritize the implementation of new and revised