Asian central banks welcome BIS invitations

SINGAPORE (Reuter): Asian central banks welcomed yesterday their invitations to join the Bank for International Settlements (BIS), although economists said monetary policy in the new member countries would not be affected.

The Monetary Authority of Singapore (MAS) said it was pleased to accept the BIS' invitation and its membership would enable it "to play a more active role in promoting cooperation among central banks...to enhance the stability of international financial markets".

Nine new members were invited into the Basle-based BIS on Monday. They were Singapore, China, Hong Kong, India, South Korea, Russia, Saudi Arabia, Brazil and Mexico.

However, one chief economist at a European brokerage house here commented; "The BIS is a prestigious organization which has done a lot of good, but don't look out for any near-term impact on monetary policy in new member countries. It won't happen."

An economist at a U.S. investment bank agreed and noted the BIS was basically a center for cooperation and the nine new members would not change its decision-making structure.

BIS decisions are made by a board of directors consisting of the Group of 10 industrialized nations -- the United States, Canada, Japan, Germany, France, Britain, Italy, Belgium, the Netherlands, Sweden and Switzerland.

But the economist said the new members would help improve Asia's representation in the BIS. At present, only two of Asia's booming economies are represented, Japan and Australia.

The addition of five further Asian countries to the BIS to give the central banks' banker a more global role was largely predicted by retiring Reserve Bank of Australia governor Bernie Fraser in a speech last month.

In his speech on regional central bank cooperation, Fraser called the BIS European-focused and said he would not be surprised to see an Asian equivalent of the Bank in three to five years.

He said an Asian BIS would be particularly important to smaller countries in times of crisis, when they tended to receive less priority from multilateral bodies such as the International Monetary Fund and the BIS.

He also said if additional members from the region were invited to join "it would increase Asia's representation on the BIS share register, although I am not sure it would do a lot more than that, at least in the short term."

The economist at the U.S. investment house said he was intrigued by the invitations to both the Hong Kong Monetary Authority (HKMA) and the People's Bank of China (PBOC) so close to Hong Kong's return to China at the end of June, 1997.

"A big vote for 'one country, two systems'," he said.

HKMA chief executive Joseph Yam agreed.

"This goes to show that the international financial community is fully supportive of the 'one country, two systems' policy enshrined in the Basic Law," he said of Hong Kong's post-1997 constitution. T he Bank of Korea director Choi Sung-hwan said membership would be useful if South Korea needed an international bail-out.

It would also be a useful source of help for a raft of monetary issues raised by membership of the Organization for Economic Cooperation and Development (OECD). South Korea is pressing to join the Paris-based club of rich nations this year.

He said South Korea had informed the BIS verbally it would apply to subscribe to BIS shares.

Choi said he expected no direct impact on local banks.