Implications of the Global Financial Crisis for Financial Reform and Regulation in Asia
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Implications of the Global Financial Crisis for Financial Reform and Regulation in Asia

Edited by Masahiro Kawai, David G. Mayes and Peter Morgan

In light of the experience of the global financial crisis, this book develops concrete recommendations for financial sector reform and regulation in Asian economies aimed at preventing the recurrence of systemic financial crises, improving the ability to manage and resolve crises, managing capital flows and promoting the development of Asian bond markets.
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Chapter 7: The Financial Crisis: A Wake-up Call for Strengthening Regional Monitoring of Financial Markets and Regional Coordination of Financial Sector Policies?

Adalbert Winkler


Adalbert Winkler1 7.1 INTRODUCTION This chapter analyzes the recent experience with regional monitoring and coordination of financial regulation as a way of improving overall regulatory performance, increasing the attractiveness of regional financial markets and mitigating the risk of crisis. The focus is on the integration of financial markets and the associated strengthening of regional monitoring and coordination in Asia and Europe, as it has been argued that the current crisis reveals the need for deeper financial integration in both regions.2 The chapter is structured as follows. Sections 7.2 and 7.3 review developments in financial integration and regulation in Europe and Asia up to the 2007 financial crisis.3 The implications of the crisis for financial integration and regulation are the focus of section 7.4. Section 7.5 offers some tentative conclusions for policy. The main conclusions are that financial integration is not only, and not even primarily, a function of regulatory and supervisory convergence. Rather, it is a function of progress in overall economic integration, that is, in the integration of goods, services and labor markets, as well as monetary integration. The lack of economic and monetary integration represents an important barrier to increasing the attractiveness of Asian financial markets to investors, both within and from outside the region. Thus, the crisis is a wake-up call for further progress on monetary integration in Asia along the lines of the reformed Chiang Mai Initiative. In Europe, where economic, monetary and financial integration are much more advanced, the crisis reveals the need to establish...

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