Asia Regulators Say G-20 Reform Favors US, Europe

Jakarta Globe, November 29, 2010

Hong Kong. The lack of a unified Asian voice in the Group of 20 leading economies means the United States and Europe are driving the overhaul of global financial regulation — with several of the new rules posing significant challenges for emerging markets, regulators said in a regional summit on Monday.

The G-20 has endorsed a series of major reforms to banking and financial market regulation, which the five Asian members of the group and Financial Stability Board members Hong Kong and Singapore have signed up to.

But Asian regulators say a number of these rules pose difficulties for their markets, while others do not address the way the crisis hit their economies.

This, they say, is partly due to the fact that the United States and Europe find it easier to find a common way to regulatory change.

New rules on banking liquidity, part of the so-called Basel III framework, were highlighted as one area where the reforms had not taken into account the size of some emerging markets’ debt capital markets.

“Asian countries are facing significant challenges in meeting these liquidity standards,” Lee Jang Yung, senior deputy governor of South Korea’s Financial Supervisory Service, told the Pan-Asian Regulatory Summit.

Those standards mean banks must hold a certain level of highly liquid assets, such as government bonds, so they can still meet their funding obligations at times of stress in the financial system.

Such rules depend on an ample supply of government debt and other liquid assets to begin with.

“We have to make sure these new liquidity standards will not put anyone at a disadvantage because of their capital markets,” Lee said. 

Reuters