norman t l chan : responding to the financial crisis – financial reform impacts and regulatory regime changes opening remarks by mr norman t l chan, chief executive of hong kong monetary authority, at the asian financial forum 2010, policy dialogue : “ responding to the financial crisis – financial reform impacts and regulatory regime changes ”, hong kong, 20 january 2010. * * * 1. “ it has often been said that history, especially financial crisis, tends to repeat itself. notwithstanding the disturbingly frequent occurrence of seemingly similar financial crises, i am inclined to believe that history does not repeat itself because, upon close scrutiny, no two crises are exactly the same. it may be more correct to say that mistakes will be punished by the market. if people do not learn from their mistakes, then the market will continue to repeat its punishment. the only difference between the major financial crises is that the punishment is getting more and more severe, if not violent. ” 2. “ going forward, i can see two possible ways to learn more about the financial markets. one is to learn from past mistakes and do something now. the second is to wait until the next disaster strikes and try to do something there and then. given what we have experienced in the last two years, it is my hope that the international community will see the wisdom of not waiting for the next crisis to learn how we can make the international financial system a more robust and safe one for all of us. ” 3. ladies and gentlemen, i made the above remarks over 10 years ago, in june 1999. it was ten months after the asian financial crisis hit hong kong, which was then followed by the turbulence of the global financial system as a result of the abrupt collapse of the ltcm. it was rather unfortunate that the fear i expressed in 1999 has come true ten years later. the international community has failed to learn the lessons from the asian financial crisis and the ltcm debacle and to make the financial system more robust and safer. as a result, we have been punished, and punished very, very severely. the latest financial tsunami, dubbed as “ once in a century ”, has demonstrated that somehow all the key safety valves and gatekeepers have failed functioning properly to prevent excessive leverage and risktaking within the financial system, leading to very heavy fiscal and social costs in the subsequent bail - outs. 4. now the international community, led by g20, is trying very hard to draw lessons from this latest financial crisis. i sense that there is

resilience and, importantly, confidence, that our market players needed in those critical moments. 18. this is certainly the case post lehman ’ s collapse, as hong kong ’ s companies and individuals liquidated overseas assets and repatriated hk $ 220 billion back into hong kong to tide themselves over the liquidity and credit squeeze. looking forward 19. it is no exaggeration to say that cls is now one of the most important pieces of infrastructure supporting the global financial market. the creation of the cls bank is also a shining example that demonstrates the power of private sector - public sector collaboration. the hkma is proud to be part of that success story. cls reports both sides of an fx transaction. to adjust the average daily value data to equate to the same reporting convention used by the bank for international settlements, the gross values should be divided by two. bis triennial central bank survey, fx turnover in april 2013. bis central bankers ’ speeches 20. so, what ’ s next? i expect markets to keep changing, and they will only change faster in the coming years. 21. as technology advances, and asia providing the engine for global growth in the medium term, i see plenty of opportunities for cls to put its strategic focus in the region. the hkma welcomes the cls ’ efforts to put more new currencies and members into its orbit. 22. i look forward to seeing this happen sooner rather than later, and welcome opportunities for cooperation and knowledge sharing between us. this is all because of what i said earlier – that we shared a common vision, and a more widely participated system should mean even less settlement risks for market players. 23. i look forward to celebrating our silver anniversary in 2029. thank you. bis central bankers ’ speeches