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.