, with finance having become increasingly borderless, exposures have grown to counterparties and markets much less familiar than those at home. the global and the intertemporal character of financial intermediation therefore puts a premium on ensuring that clear and comprehensive information is at the disposal of market participants. yet such information is often not readily available. it may be expensive, or it may be distributed unevenly across market players. not all participants are willing to bear the cost of collecting the necessary information, in particular when it is easy for others to free - ride on their efforts. decisions may then be taken on the basis of a less - than - complete information set and risks may be run which in a more informed environment would have been avoided. another frequent occurrence in financial markets is that participants have unequal access to information. borrowers typically are several steps ahead of lenders in knowing the probabilities of success of their projects and how gains and losses might be shared. lenders may be unaware that the funds they provide flow to the most risky investments, or are wasted on less productive activities. to protect themselves against this information deficit, lenders may ration their finance or even withdraw from participation altogether. in the economic literature, these problems, known as adverse selection and moral hazard, have been shown to have a negative impact on financial market efficiency, especially in a cross - border setting. the recent asian crisis is a good example of how lending and borrowing decisions can be biased by lack or uneven distribution of information. few investors realised to what extent the massive flow of foreign - currency funds into several asian economies was diverted into activities with little or no prospects of generating foreign - currency resources, or, should the economy turn down, of yielding any returns at all. confidence in official reserve data was greatly shaken as it became clear to what extent foreign exchange assets were mortgaged by massive short forward positions in thailand or by placements in overseas branches of korean banks facing problems themselves in meeting foreign currency obligations. moral hazard was also a problem. given that they believed that their liabilities were implicitly guaranteed, korean chaebol embarked on a largely unfettered investment spree. at the same time, domestic banks and foreign investors in south east asian countries took unwarranted comfort from governments ’ commitments to maintain fixed exchange rates, or from expectations that the international community would help safeguard private investment. these expectations prolonged the period of excessive capital inflow ; and thus rendered more costly its eventual reversal. market outcomes

a significant increase in supervisory training by g - 10 supervisors in association with the secretariat of the basle committee. finally, the committee has recently initiated joint meetings with regional supervisors on the occasion of its quarterly meetings in basle. all of these efforts are directed to building a truly global network of supervisors and the wide dissemination of documents, standards and guidelines developed by the committee in association with others. similar initiatives have recently been undertaken by the committee on payment and settlement systems with similar objectives in mind. the euro - currency standing committee had, for many years, “ extended ” meetings involving representatives of important non - g - 10 financial centres. however, it is now actively engaged in discussing how broader participation might be made more effective. d. the role of the bis in crisis management it has been analytically convenient above to deal separately with the three major components of the international financial system and the bis committees which support each. this approach also emphasises the comprehensive reach of the committees ’ concerns. however, a deficiency of this approach is that it fails to emphasise the relationships between the various components of the system, as well as the further links to macroeconomic variables of interest to central bankers. in fact, it is the complex reality of these interrelationships that makes the pursuit of financial stability such a challenging task and also accounts for the fact that there have been so many financial crises along the way. before turning to the role of the bis in crisis management, it is important to note that, even at the domestic level, a certain “ constructive ambiguity ” often applies about the potential role of the public sector. this is to avoid bad behaviour and moral hazard on the part of the private sector. given that no two crises are the same, the amount of pre - planning that can be done is in any event limited. perhaps the most that can be hoped is that the prospective players in the unfolding drama - the central bank, the treasury, supervisory bodies and deposit insurance agencies - know each other well and have well - established lines of communications, so that decisions affecting all can be speedily agreed upon. at a moment of crisis, the time allowed for decision - making is not likely to be great. moreover, as we have seen in south asia, the failure of domestic policy - makers to take credible policy actions quickly ( particularly if these policies have been prescribed in the context of an imf programme ) can result in the market imposing heavy penalties. the provision of international support to help resolve financial crises with