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.