Watch Asian central bank balance sheets: BIS urges

Watch Asian central bank balance sheets: BIS urges

SYDNEY, Australia (Reuters): The Bank for International
Settlements said on Tuesday more attention should be paid to the
balance sheet independence of central banks in Asia.

In a discussion paper for the Reserve Bank of Australia's
annual conference in Sydney, BIS official Robert McCauley said
progress had been made in Indonesia and South Korea since the
events of the Asian crisis.

"More attention should be paid to the balance-sheet
independence of central banks," McCauley said in a paper on
setting monetary policy in East Asia.

"Here there is clear progress in Indonesia and Korea since the
crisis in extinguishing central bank credit extended to banks,"
he said.

McCauley said Korea had worked "half its way" out of the
balance sheet implications of the crisis.

Events during the Asian crisis had left big marks on the
balance sheets of Bank Indonesia, Bank of Thailand, and to a
lesser extent, the Bank of Korea.

He said the balance sheet aftermath of crisis could, at the
limit, impair the capital and weaken the income of the central
bank.

This could hurt its credibility in the market place and make
it dependent on appropriations.

The BIS paper was one of several under discussion at the
Reserve Bank of Australia's annual conference.

The conference was also attended by many senior officials from
Asian central banks, who came to Sydney for the Executive Meeting
of East Asia-Pacific (EMEAP) central bank governors on Monday.