Developing and Strengthening Financial Markets - Initiatives and Recommendations

Regional Forum on Securitization: Although securitization is fast becoming an important source of financing, many structural, regulatory, fiscal and other obstacles continue to inhibit its further development. In an effort to begin to address these obstacles, an international conference on securitization and a workshop for regulators from within the APEC region were held in Kuala Lumpur, Malaysia last December. A survey on the status of securitization activities in APEC member economies was carried out to gather information on these activities in APEC economies and to identify pertinent developmental issues and regulatory concerns. Based on the outcome of these activities, we encourage the development of securitization activities through (i) the continued removal of impediments to market development; (ii) enhanced training and technical assistance to facilitate the removal of impediments to market development; and (iii) the continued sharing of expertise among our economies. We have adopted a voluntary action plan to assist individual member economies that are interested in accelerating the development of securitization activities in their own markets.

Regional Forum on Pension Fund Reform: Officials from many of our member economies, together with academics and experts from the IFIs, attended the Regional Forum that was held from February 4-6 1998, in Cancun, Mexico. The forum had as overall objectives the interchange of expertise, information and best practices of pension systems across the APEC region, and the discussion of: the lessons of Latin American pension reforms for APEC economies; the potential for reform and its impact on the development of financial markets, domestic savings, and income distribution; the strategies for the administration of pension funds; the prudential regulation of pension funds investments; and the relative role of the private and the public sectors in pension fund management. A background report describing the pension systems of the APEC economies and outlining the major issues and difficulties was prepared by the ADB.

We recognized that pension funds can play an important role in mobilizing private savings, and broadening, together with other institutional investors, the demand base, especially for long-term debt instruments. Moreover, permitting pension funds to invest in financial instruments other than low-income government bonds can greatly enhance the supply of long-term finance to the private sector. We also recognized that factors such as ageing populations, low levels of national savings, unsustainable pressure on public finances and distortions created by high social security contributions make pension fund reform a priority for many APEC economies, placing it at the top of the economic and social agenda. While pension reforms can be spread along a broad spectrum, a sound prudential and regulatory framework is necessary for all types of public and private pension schemes.

Strengthening Financial Market Supervision: Recognizing the importance of sufficiently trained financial supervisors, we assessed the adequacy of existing training programs for both bank supervisors and securities regulators. We identified significant unmet training needs and limitations in the training management process at the domestic level, and determined that enhanced regional and international co-ordination to address these concerns would be useful. Importantly, we recognized that improvements in training programs would only be effective in enhancing the quality of supervision where a sound supervisory and regulatory regime is in place, and that training programs should be based on sound supervisory and regulatory principles.

Based on these results, we agreed to implement in a timely and comprehensive manner the Action Plans for Strengthening Training of Bank Supervisors and Securities Regulators in APEC economies. The Action Plans include measures to improve the quality of training programmes at the domestic level and to strengthen co-ordination in meeting training needs through regional and international programmes. Regional advisory groups will be established to oversee the implementation of the Action Plans, while the day-to-day responsibilities will be overseen by a secretariat to be funded and located at the ADB. We thank the ADB for its valuable assistance in implementing the Action Plans and for funding the secretariat and the technical assistance requirements of both plans.

Enhanced co-operation among export financing institutions: Export financing institutions (EFIs) can play a catalytic role in mitigating risks and mobilizing private-sector financing for infrastructure development. Representatives of the Export Financing Institutions (EFIs) in the APEC region have met several times to discuss the role of EFIs in promoting private sector infrastructure projects, including the opportunities for co-operation among EFIs through information exchange, knowledge transfer, possible co-lending, and the opportunity for policy dialogue between EFIs and host economies.

EFIs also discussed their role in the wake of the Asian financial instability as an important example of EFI co-operation. We recognize different mandates and approaches in various EFIs, however we expect a synergy effect through their co-operation. In view of strengthening EFI co-operation, we also welcome the protocol agreement which sets out a framework for promoting technical co-operation and has been signed by fifteen EFIs and Export Credit Agencies from across the region.

Supporting the development of credit rating agencies and strengthening information disclosure standards: We encourage the development of independent rating agencies according to international best practices. In order to assess the status of existing rating agencies we examined the current experiences with credit rating agencies in the region to determine how well they are fulfilling their key role in promoting the flow of timely and accurate information across capital markets. The results of work completed thus far include the identification of some of the important issues to be addressed, some of which pertain to the scope for harmonization and increasing the transparency of credit rating agencies' activities. We are currently examining experiences in the region regarding credit rating services. We hope to identify ways to improve rating agencies' ability to promote the flow of timely and accurate information to capital markets. We also encourage steps to strengthen information disclosure standards in the region consistent with international best practices.

Strengthening clearing and settlement infrastructure: Modern clearing and settlement systems are integral to capital market development. The ADB and several member economies stand ready to provide technical assistance to help strengthen clearing and settlement systems in economies with less advanced systems. We welcome the report of the Executive Meeting of East Asian and Pacific Central Banks (EMEAP) in this area.