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Asian bankers talk of cooperation, yen bloc

TOKYO: Senior central bankers from Asia met here Friday at a symposium on money, agreeing that cooperation was a good thing but was easier said than done. The 14 bankers and banking officials at the symposium convened by the private Institute for International Monetary Affairs, were unanimous that closer cooperation could only benefit the region.

But there was some dissent about whether Asia needed another formal body to achieve such results.

The bankers and officials came from Australia, China, Indonesia, Japan, Hong Kong, South Korea, the Philippines, Singapore and Thailand.

Andrew Sheng, deputy chief executive of the Hong Kong Monetary Authority, highlighted the "importance of enhancing cooperation" between central banks and monmetary authorities and pointed to the so-called repo agreements signed by most Asian authorities after last year's Mexican peso crisis last year.

The bilateral repurchase, or repo, agreements are aimed at helping central banks to raise short-term funds to defend their currencies from speculative attack.

Under a repurchase agreement, a central bank can raise cash by selling securities to another bank on the understanding that it will buy them back at a set price on certain date.

Paul Soetopo Tjokronegoro, managing director of Bank Indonesia, said the repo agreements "serve as a warning to speculators" that any attempt to play on a currency like the rupiah was a no-win situation.

But Tjokronegoro said that while informal cooperation had its pluses, it would have to become far more efficient before any process was formalised.

"We have to get it more focussed, more coherent," agreed Zamani Abdul Ghani, assistant governor of Bank Negara Malaysia.

Myoiung Ho Shin, former deputy minister for international affairs at South Korea's finance ministry called the repo agreements "an encouraging sign of cooperation" and suggested they could lead to an Asian-style Bank for International Settlements (BIS).

He was referring to the Basel-based institution that provides a formal forum for regular talks between central bank governors of the Group of Ten - the United States, Japan, German, France, Britain, Italy, Canada, the Netherlands, Sweden, Belgium and Switzerland.

Akira Nagashima, deputy governor for international relations at the Bank of Japan, said the time had not yet come for an Asian BIS.

"We think it would be too early to move in this direction at this stage but it would be important to discuss this kind of cooperation in a constructive manner among the central banks concerned," Nagashima said.

Central bank officials already meet regularly under EMEAP, formed in 1991 and grouping Australia, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore and Thailand.

Ian Macfarlane, deputy govenor of the Reserve Bank of Australia, said the governmental Asia-Pacific Economic Cooperation (APEC) forum could play a complementary role, by bringing together central bankers and finance ministers to discuss policy.

A second common issue at the symposium was the possible use of the yen as a reserve currency.

Macfarlane said the yen was growing in importance in the region and its rise towards reserve currency status would continue, but Japan would have to further liberalise its markets to control its surplus if yen stability was to be maintained.

Shin said there was a "great possibility that the Japanese yen would become the reserve currency in our region."

"But to achieve this role, the Japanese government has to show a strong intention to stabilise the value of the yen and develop capital markets in a clear and transparant way," he said.

Nagashima said the Bank of Japan was happy to see the yen more widely used, but acknowledged Japanese markets needed to become more open and deregulated.

He said the Bank of Japan and the finance ministry "will try to make every effort to conform our markets more to international standards."

Nagashima said the Bank of Japan is commited to further opening of financial markets so the yen can become "a useable currency" in international trade.-AFP