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RBA's Asia concern

RBA’s Asia concern

(28 September 2007 – Asia) The Reserve Bank has expressed concerns over the integration of Asian financial systems with the global market. While having made great strides, the RBA believes there is still more to be done in three particular areas.

Philip Lowe, assistant governor of financial systems, RBA, indicated at an annual international banking conference that evolution was needed in the ability to borrow in the international capital markets in a country’s own currency; in exchange rate flexibility; and in cross-boarder crisis management.

Mr Lowe said that unwillingness by investors to lend to a country in its own currency complicates the integration of that country into the world financial system.

Lowe indicated that to reach integration with the global market, countries need to have sound macroeconomic framework and develop confidence in public institutions.

Also necessary is a fluctuating exchange rate. Deep and liquid markets are required for hedging and managing risks, he said.

However, Lowe had sympathy for the issue at hand. He said that while the effort was being put in, cross border management is fundamentally difficult.
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