APEC states warned to speed up reforms or face new crisis

APEC states warned to speed up reforms or face new crisis

BANDAR SERI BEGAWAN (AFP): An international financier Friday
lamented there is still a lack of transparency in APEC economies
and warned a crisis could recur if reforms are not carried out
more urgently.

Luc Rousselet, chairman of APEC Financiers' Group, a private
sector initiative to strengthen financial systems said "people
had forgotten" about the Asian economic crisis which broke out in
mid-1997.

"In Asia, there is a lack of regulation, transparency and
benchmarking.

"You must take it (the Asian crisis) as a lesson and make sure
it does not happen again," Rousselet told reporters at the
sidelines of the Asia Pacific Economic Cooperation forum finance
and central bank deputies meeting in the oil-rich sultanate of
Brunei.

Rousselet, who is general manager of the Brunei-based Baiduri
Bank affiliated with French bank BNP-Paribas, said the financial
systems in certain APEC economies continue to remain weak.

"Structurally, it has not improved," he said, without naming
the countries.

Rousselet expressed fears that with APEC economies registering
growth, they would ignore the lessons of the economic crisis,
which saw many Asian economies go into reverse in 1997 and 1998
and financial turmoil spread to Latin America and Russia.

"Being human beings, in good times, we may forget it. But this
is what we want to avoid," he said.

At their meeting last year in Langkawi, APEC finance ministers
asked the financiers to prepare a report on ways to prevent and
resolve future financial crises.

Rousselet said while APEC economies were recovering at the
macro level, businesses were still suffering from the effects of
the crisis.

"I'm seeing it with my clients. There is still too much debt
and over-investment," he said. He added many had US dollar debt,
which has increased their burden recently as Asian currencies
slump against the greenback.

Meanwhile, Mexico, which suffered a debt crisis and ensuing
strains on the banking system in the mid-1990s, is leading an
APEC initiative to establish policies which will help ensure that
future bank failures do not endanger the whole banking systems of
member countries.

An APEC briefing paper said timely policy actions may avoid a
costly systemic failure to the banking system if a financial
crisis occurs.

There is already work being done by other international
organizations on how to prevent banking failures, the document
said.

"In order to avoid significant duplication of work, the
initiative plans to address the issue of how to manage bank
failures when they actually occur," it says.

"Several APEC economies have experienced bank failures and
weaknesses in their financial systems and the fiscal cost of such
failures has been very large."

The cost of banking failures have been partly borne by
depositors and other creditors of failed banks, but it is largely
governments that have had to foot the bill, the document said.

Although banking supervision has improved, the risk of bank
failures will continue to exist because of the liberalizing of
financial markets and free competition.