source of assets for the expanding securitisation market - - total assets in securitisation vehicles would now be over $ 20 billion, double the level of two years ago. ) • bank credit ( net of securitisation ) has grown at an annual rate of around 10 per cent so far in 1997, compared with about 12 per cent during 1996. the main categories have all grown at close to this average. • asset quality is in good shape, with impaired assets at 0. 8 per cent of assets in june 1997, compared to 1. 1 per cent a year earlier. loan write - offs have continued to fall, and loans newly identified as impaired each quarter remain both low and steady. banks are responding to margin squeeze on several fronts. there has been further unwinding of the longstanding cross - subsidisation of transactions and account - keeping services out of interest margins. there is a continuing drive to cut costs - - through rationalising branch networks, trimming management structures and investing in labour - saving technology. this has included closer investigation of the potential savings from outsourcing non - core activities ( such as cheque processing and information technology ) and sharing basic facilities, and the past year has seen some important initiatives of this kind. - 2regional banks, in particular, are looking to diversify their loan portfolios to reduce their dependence on home lending. but all banks are, to varying extents, pursuing a wider range of revenue sources as competition intensifies in traditional business lines, and areas such as funds management seem to offer better long - term prospects. through acquisitions and organic growth, the ratio of banks ’ funds under management to balance sheet assets has risen to around 30 per cent from 20 per cent four years ago. ( despite these efforts, it is interesting that there has been no increase in the ratio of banks ’ domestic non - interest income to domestic assets. ) the closer management of bank capital has been another notable feature of the past year or so. one result has been the major banks ’ share buy - back programs and the repurchasing / restructuring of subordinated debt. the rba has a keen interest in these developments, given the centrality of capital in our supervisory system. closer alignment of capital with risks inherent in a bank ’ s activities ( and prospective balance sheet growth ) is, of course, not to be discouraged. a banking system with excessive capital will be less efficient and less competitive in performing its financing role

on when - issued trading will be expedited, and guidance provided to intermediary agencies on technological upgrading of relevant systems so deepen the inter - bank bond market. new instruments of interest rate swap will be explored and certain institutions will be allowed to experiment in interest rate swap. fourthly, there has been more innovation in the product and transaction at the foreign exchange market banks have been allowed to conduct foreign exchange swap with their clients ; otc and market makes have been introduced to the market. on may 18, 2005, a market maker driven system of foreign currency to foreign currency spot transaction was launched, offering the market more products. more participants and a larger coverage were introduced in the piloting operation of forward foreign exchange surrender and purchase. we have moved faster to integrate with the international foreign exchange market. in march 2006, the china foreign exchange trade system and the chicago mercantile exchange reached an agreement for chinese financial institutions and investors to trade the exchange rate and interest rate products of the latter through the former. fifth, innovation in financial service philosophy and mode has been promoted. opening - up has introduced advanced expertise, new philosophy, new technology, and new philosophy from developed financial market. the domestic financial institutions have parted ways with their old operational method, adopted the philosophy of putting the customers first, innovated in service system and set up a service mechanism in line with the international practice in terms of financial product, business arrangement, procedure and management. quality of their service, operation and management has been elevated. domestic enterprises and households now enjoy financial services in investment, wealth management, payment and settlement, financial consulting, etc, and the convenience of payment through bank cards, and online payment. thanks to opening - up, the chinese financial sector has become stronger and the domestic financial market has progressed by leaps and bounds. the financial system has functioned better in resource allocation, promoting the rapid growth of financial sector and national economy. 4. further promote the opening - up and enhance the competitiveness of the financial sector china ’ s economic performance has caught global attention because its impact on the global economy has been on the increase. in the years to come, along with the progress of globalization and economic growth in china, we will definitely integrate more deeply in the world economy, and influence the world economy more significantly. it is a challenge for the financial industry to capital account ; the domestic financial market will be further opened ; financial legislation will be strengthened to build a market environment for fair competition ; a financial macro management system