over time, this new relationship will also create opportunities for commercial cooperation on other fronts. the implementation of this pvp link comes at an opportune time in view of the need to better manage the increased settlement risk due to the rapid growth in fx transactions and to assist financial institutions, in particular banks, to comply with the standards recommended by the international standard setting bodies. driving the rapid growth in fx activities of the regional currencies has been asia ’ s expanding share in global trade and investment flows. in the past decade, trade between asia and the rest of the world had grown tremendously. asian economies ’ export of goods and services, as a percentage of the world total, increased significantly from 29 % in 2002 to 38 % in 2012, amounting to us $ 8. 5 trillion. asian economies ’ total imports also increased significantly in the same period from 32 % to 47 %. meanwhile, the investment flows between asia and other regions have also intensified. supported by the robust trade performance and increasing capital flows, activities in the regional fx market have increased significantly. according to the latest triennial survey on global fx market activity of the bank for international settlements ( bis ), the average daily turnover in fx transactions involving asian currencies increased by 172 % from us $ 354 billion equivalent in 2001 to us $ 962 billion equivalent in 2010. bis central bankers ’ speeches against this backdrop of rapid growth in global fx activities, the basel committee on banking supervision issued an updated guidance on management of fx risk in february 2013. the committee cautioned that many banks underestimate their principal risk by not taking into account the duration of exposure between trade execution and final settlement, which may create significant concerns during times of market stress. a key recommendation of the committee is that banks should reduce its principal risk as much as practicable by settling fx transactions through the use of financial market infrastructures that provide pvp arrangements. banking supervisors worldwide are incorporating the updated guidance into their supervisory requirements. for example, banking supervisors in hong kong are now bringing their supervisory manuals in line with the guidance, and have reminded banks to take actions to address any gaps and deficiencies. the decision of the bank of thailand to implement the pvp link will certainly facilitate banks in thailand to meet the basel committee ’ s recommended standards in good time. the new pvp link will be the third cross - border pvp link for hong kong ’ s usd rtgs system. the successful experience of the established links with malaysia and indonesia

the new accord, but also because this city has one of the highest concentrations of banking institutions in the world, with a strong presence of international banking groups. many people all over the world have been involved in basel ii. but there is no - one more qualified to speak on the subject than our guest today. governor caruana is the current chairman of the basel committee on banking supervision. he is also governor of the banco de espana, and a member of the governing council of the european central bank. governor caruana has extensive experience in both the private and public sector in spain, and is the author of several publications on the spanish financial system. we are greatly honoured that he has accepted our invitation to speak on basel ii today. the basel ii project was already several years old when governor caruana took over its leadership, as chairman of the basel committee, in may 2003. but he has put his own stamp on this project, and has made three special personal contributions. first, he has brought the formulation process to a successful conclusion with the publication last june of the definitive document on the revised framework. producing this necessary road - map was no easy achievement given the differing views that had to be taken into account, and the considerable degree of scepticism in the industry. secondly, he has, through persuasion and advocacy, managed to convert scepticism towards basel ii into a positive and constructive attitude. he has done this in particular by stressing that, when you look beneath the surface, basel ii is not so much about how capital adequacy ratios are calculated, as about how banks can improve their risk management and, thereby, how the efficiency of the banking system can be improved. he has also placed emphasis on the point that basel ii applies not just to advanced banking systems but to banking systems in all stages of development – an observation of particular relevance to this region. thirdly, and of no less importance to us in hong kong, governor caruana has personally supported greater involvement by non - g10 members in the basel ii process. within this region, central bankers have been increasingly active in recent years in trying to ensure that our voice is heard in the process of policy formulation and standard - setting in basel. governor caruana has on a number of occasions spoken out on the need to ensure that our voices are indeed heard, and that our views are actually taken into account. and there are signs that this practice is turning into a tradition : it has