The 10th anniversary of the BIS Representative Office for Asia and the Pacific

Remarks by Mr Hervé Hannoun, Deputy General Manager of the BIS, to a reception in Hong Kong SAR, 7 July 2008.

Abstract

The BIS established its Representative Office in Hong Kong SAR on 11 July 1998 to contribute to the growing monetary and financial cooperation among central banks in Asia and the Pacific. The opening of the Office brought the BIS into Asia. Initially, it organised meetings and undertook research. Subsequently, the Asian Office dealing room was opened in 2000 to allow central banks and other official foreign exchange reserve managers to place funds with the BIS during Asian hours. Finally, in early 2006 the BIS shareholders in the region, gathered in the Asian Consultative Council, endorsed the BIS Asian initiative proposed by General Manager Malcolm Knight; a key element of this initiative was a three-year research programme.

Full speech

Chairman Teng, Deputy Chief Executive Pang, ladies and gentlemen, it gives me great pleasure to welcome you to this reception to mark the 10th anniversary of the opening of the Representative Office for Asia and the Pacific of the Bank for International Settlements. The BIS established the Office in Hong Kong on 11 July 1998 to contribute to the growing monetary and financial cooperation in Asia and the Pacific.

The BIS brings to this cooperation among central banks its experience in furthering such cooperation in Europe. Until a little more than a decade ago, a key activity of the Bank was promoting central bank cooperation in Europe. For instance, the BIS served as agent for the European Payments Union, setting the stage for convertible current accounts in Europe in the late 1950s. The European central bank Governors began to meet in Basel in 1962. The BIS housed their secretariat, administered their swap arrangements and hosted the European Monetary Institute established by the Maastricht Treaty. As this Institute relocated to Frankfurt in 1994 and subsequently became the European Central Bank, the BIS embarked on its global outreach, seeking in the process to preserve its nature as a venue for candid exchanges of views among central bankers.

In this region, the Bank of Japan and the Reserve Bank of Australia have long been shareholders of the BIS. In 1996, the People's Bank of China, the Hong Kong Monetary Authority, the Reserve Bank of India, the Bank of Korea and the Monetary Authority of Singapore also became shareholders. Subsequently, Bank Indonesia, the Central Bank of Malaysia, the Reserve Bank of New Zealand, the Bangko Sentral ng Pilipinas and the Bank of Thailand did so as well. In 2006, Governor Zhou of the People's Bank of China joined the BIS Board of Directors. These steps brought Asia and the Pacific into the BIS.

The opening of the Representative Office in 1998 brought the BIS into Asia. Initially, it organised meetings and undertook research. Subsequently, the Asian Office dealing room was opened in 2000 to allow central banks and other official foreign exchange reserve managers to place funds with the BIS during Asian hours.

An important milestone in BIS banking activities in Asia was reached in 2003 when the Executives' Meeting of East Asia-Pacific Central Banks gave the BIS a $1 billion mandate to manage an Asian Bond Fund, which invested in US dollar bonds issued by eight economies. In retrospect, the cooperative effort behind this reserve pooling is striking. It was with the local currency funds under the Asian Bond Fund 2 that central bank cooperation in this region really hit its stride. Here, the goal was to develop local currency bond markets. The BIS has played the role of administrator for central bank investment in funds that have generally been open to private investors. In the process, the central banks have played a catalytic role, for instance introducing cost-effective exchange-traded bond funds in a number of markets. And this is a case of doing well by doing good: central banks have seen returns in the Pan Asia Bond Index Fund from July 2005 easily outperform the returns on US Treasuries or agencies of comparable duration.

In early 2006, the BIS shareholders in the region, gathered in the Asian Consultative Council, endorsed the BIS Asian initiative proposed by General Manager Malcolm Knight. A key element of this was a three-year research programme, now entering its third year. This ambitious project has brought in researchers from inside and outside the region, from central banks and academia, to address questions raised by central banks and financial supervisors in Asia on monetary and exchange rate policy, financial market development and financial stability. By the end of the programme, it is expected that all of the BIS shareholders in the region will have joint research projects with BIS economists. This initiative also includes enhancing the work of the Financial Stability Institute and widening the range of BIS banking products, starting with live prices for foreign exchange.

Much progress has been made on a series of research projects, in particular by inviting research fellows from central banks in the region to visit the Asian Office. In addition, two Asian research networks have been organised under the research programme. The BIS and its Asian Office have greatly benefited from this collaborative research. One sign of the deepening of BIS relationships with Asian central banks is a series of joint seminars, in particular with:

• the Central Bank of Malaysia, on financial market development and monetary policy;
• the Bangko Sentral ng Pilipinas, on central bank communication;
• the Bank of Korea, on issues in household debt; and
• Bank Indonesia, on macro models.

Forthcoming joint seminars include ones with:

• the Monetary Authority of Singapore, on inflation dynamics; and
• the Reserve Bank of India, on lessons from the recent financial turmoil.

In all of its efforts, the BIS has cooperated closely with the central banks represented here today: the People's Bank of China, the Bank of Japan, the Bank of Korea, the Monetary Authority of Macao and, from outside the region, the Bundesbank and the Federal Reserve Bank of New York. And, of course, I would also like to express our gratitude to the Hong Kong Monetary Authority. It is fair to say that all that has been done by the BIS Asian Office since its opening could not have been achieved without the constant and dedicated support of the HKMA. We also appreciate the cooperation of the authorities of the Hong Kong Special Administrative Region and the Commissioner of the Ministry of Foreign Affairs. Finally, I would like to emphasise that all the work done by the BIS Office in Asia is a tribute to the high quality, dedication and professionalism of its staff members, with special thanks to Bob McCauley, the BIS Chief Representative in Hong Kong.

Let me then propose a toast. To monetary and financial cooperation among central banks in Asia and the Pacific!