Asian economic crisis shows need for changes<\/p>\n
BASEL, Switzerland (AFP): The crisis in Asia underlines the
\nneed for changes in the world financial system, the Bank for
\nInternational Settlements said in its latest quarterly banking
\nreport.<\/p>\n
The turmoil has also lent a new sense of urgency to addressing
\nissues of crisis prevention and management, according to the
\nreport being issued on Monday.<\/p>\n
\"Recent events (in Asia) have underlined the need to adapt the
\narchitecture of the world financial system, which is increasingly
\nbeyond the reach of national regulatory powers,\" the report
\nnoted.<\/p>\n
One need is for improved cooperation between financial and
\nbanking supervisors, the BIS said.<\/p>\n
The wave of mega-mergers, alliances in the financial industry
\nand the restructuring underway in the derivatives market are also
\nlikely to lead to a rethink of supervision and regulation, said
\nthe Basel-based central bankers' bank.<\/p>\n
\"Compounding these challenges are the pressing issues related
\nto the advent of the euro (in January 1999), which has
\ncontributed to the process of global financial consolidation and
\nthe transition to the next millennium,\" BIS said.<\/p>\n
In Asia, given the extent of domestic financial weakness, the
\nsize of short-term private sector debt and deep-seated problems
\nof governance, international rescue packages (by the
\nInternational Monetary Fund) could not have been expected to
\nstabilize markets, the BIS said.<\/p>\n
The IMF has arranged multi-billion dollar bail-outs for South
\nKorea, Thailand and Indonesia, the three economies worst hit by
\nthe wreckage of currencies and stockmarkets which started in the
\nmiddle of 1997.<\/p>\n
Asian authorities were faced with the difficult dilemma of
\nreconciling the short-term challenge of restoring market
\nconfidence and the longer-term needs of restructuring their
\neconomies, the BIS said.<\/p>\n
\"Instances of early (monetary) relaxation have only served to
\nprompt further exchange rate instability,\" the BIS said.<\/p>\n
Yet, deflationary policies in already depressed economies have
\nhad negative effects on both the banking system and the economy.<\/p>\n
\"Resolving the Asian crisis will therefore be an important
\ntest of the ability of national and international authorities to
\ncope with the global interdependence of markets,\" the BIS
\nconcluded.<\/p>\n
Asian exposure<\/p>\n
International banks sharply cut their exposure to Asia in the
\nfirst quarter of 1998 while boosting their lending to Russia,
\naccording to the Bank for International Settlements.<\/p>\n
While the Asian financial crisis is more than a year old,
\nRussia's economic meltdown sparked by a devaluation of the ruble
\nonly started in August.<\/p>\n
The credit cut-back by BIS-reporting banks to Asia totaled 34
\nbillion dollars between January and March in reaction to a new
\nbout of turbulence in the region, the BIS said in its latest
\nquarterly international banking and financial market report being
\nissued Monday.<\/p>\n
The \"most dramatic\" retreats were from South Korea, Thailand
\nand Indonesia, all three recipients of International Monetary
\nFund aid packages.<\/p>\n
International lending to South Korea fell by US$16.3 billion
\nin the period with the country's foreign bank debt at $87.2
\nbillion as of March 1998.<\/p>\n
Banks' pullback from South Korea was eased by the exchange of
\nsome $22 billion of short-term claims on local banks into longer-
\nterm loans guaranteed by the government, the BIS said.<\/p>\n
Outstanding credit to Thailand fell $8.5 billion in the
\nquarter to $70.8 billion and to Indonesia it fell five billion to
\n57.6 billion.<\/p>\n
\"In all three countries, a sharp contraction in trade credit
\nand the unwinding of collateralized short-term loans granted
\nearlier were possibly the most important influences,\" in the
\ndecline, the report said.<\/p>\n
The shrinkage would have been larger had it not been for the
\naccumulation of arrears, including by institutions taken over by
\nthe authorities pending restructuring, the BIS noted.<\/p>\n
As a result, China has become the largest bank debtor in Asia,
\nto the tune of $90 billion. However, the figure must been seen in
\nrelation to the $70 billion of deposits held by Chinese residents
\nat foreign banks, which include some of the country's $140
\nbillion in foreign exchange reserves, the BIS said.<\/p>\n
Japanese banks staged the biggest overall retreat, whittling
\ndown their foreign assets by a record $244 billion in the period.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/asian-economic-crisis-shows-need-for-changes-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}