[asia-apec 442] Statement from APEC Finance Ministers Meeting (Part2 of 3)

[PAN Asia Pacific]

(Cont'd)

Developing and Strengthening Financial Markets

25. The recent financial instability in Asia underscores the
importance o f developing strong, resilient and well-regulated
domestic financial mark ets in the framework of a stable
international financial system. In this  regard, we welcome and
endorse the Basle Core Principles on Effective Ban king Supervision
and urge the International Conference of Banking Supervi sors to
endorse them at their meeting in October. We endorse the working 
party report on Financial Stability in Emerging Market Economies
prepared by the G-10 in collaboration with a number of emerging
market economies. 

We also noted the efforts of the Asian Development Bank in evolving
"Sou nd Practices to Facilitate Development of the Financial Sectors
in the AP EC Region" that reflect the lessons of the financial
instability in Asia. In the same vein, we also look forward to the
results of IOSCO's current efforts to develop an appropriate set of
principles for supervision of s ecurities markets.


26. We strongly endorse the idea of enhancing surveillance of
financial s ector supervisory regimes. We look forward to the
international financial institutions and the international
regulatory community working together to study ways in which this
can be accomplished including options for be tter co-ordination or
enhanced forms of collaboration, such as a peer rev iew process.
Any reform should strengthen or complement rather than dupli cate
existing global or regional arrangements.

27. We welcome the successful completion of the World Trade
Organization' s Financial Services Negotiations. This agreement
will achieve improved m arket access and lower barriers among
financial markets. Greater competit ion in the provision of
financial services can, if the prudential regulat ory framework is
in place, contribute to capital market development. We u rged
participating economies to ratify their commitments so that the
agre ement can enter into force as scheduled on March 1, 1999.

Work in the APEC Finance Ministers' Process on Developing and
Strengtheni ng Financial Markets

28. Promoting the development of strong, resilient financial sectors
in o ur region has been a central goal of the APEC Finance
Ministers' process  since its inception. Our work over the past year
has continued to focus o n this objective, which has assumed even
greater importance in light of t he financial crisis in Asia. At our
meeting last year in Cebu, we launche d six collaborative initiatives
to promote capital market development and facilitate private
investment in infrastructure projects as a response t o our
Economic Leaders' call for a concrete and practical work program.
We also agreed that our Deputies would prepare a voluntary action
plan to support the freer and stable flow of capital in our region.


29. This year in Kananaskis, we discussed and welcomed the progress
achie ved so far under the initiatives launched in Cebu.  We plan to
continue ou r efforts over the next year in three priority areas:
capital market deve lopment; capital account liberalization; and
strengthening international financial systems.

Capital Market Development

30. Over the past year, we examined ways to further capital market
develo pment under a number of collaborative initiatives. We
examined ways to st rengthen clearing and settlement infrastructure
within our economies. On  this initiative a final report has been
issued to us. 

31. We conducted a regional forum on pension fund reform, which
produced a very useful technical report on the issue including the
role pension fu nds can play in mobilizing private savings and
broadening the demand base for long-term debt instruments. In the
next year, Chile will host a seco nd forum, to be co-ordinated by
Chile and Mexico, which will focus on pol icy issues in this area.


32. Under our initiative on securitization, participating economies
draft ed recommendations on supporting the development of
asset-backed securiti zation, including a voluntary action plan which
interested individual eco nomies can implement to support the
development of securitization in thei r markets. We endorse these
recommendations. 

33. We recalled that the impetus for much of our work on developing
and s trengthening capital markets was to facilitate private
financing of infra structure. Over the past year, we have continued
our work on this subject through our initiative to support
co-operation among export-financing in stitutions. In particular,
we welcome the protocol agreement signed by fi fteen Export
Financing Institutions and Export Credit Agencies from acros s the
region which will provide a framework for co-operation among them w
hen market demand for infrastructure recovers. 

34. We recognized, however, that the recent period of financial
instabili ty has significantly changed the circumstances for
financing infrastructu re projects. There is a need to analyze the
impact of this on infrastruct ure development in the region and to
explore strategies to promote privat e financing for infrastructure
over the medium term. We call upon the Asi an Development Bank to
work in this area and to report back to us at our next meeting.

35. We received a progress report on the collaborative initiative to
supp ort the development of credit rating agencies and strengthening
of inform ation disclosure standards, and look forward to further
results next year . 

36. We agreed to begin work on a new collaborative initiative on the
deve lopment of domestic bond markets in the region, which will be
co-ordinate d by Hong Kong, China. This should be able to build on
the contributions on this subject from the APEC Financiers Group.

Capital Account Liberalization

37. We agree to continue to implement policies to enable economies
to ben efit from and minimize the risks of capital account
liberalization. We re affirm our commitment to continue working on
designing a Voluntary Action Plan For Supporting the Freer and
Stable Flow of Capital. 

38. We recognize that economies should pursue capital account
liberalizat ion in an orderly manner. Prerequisites include sound
macroeconomic polic ies, effective prudential regulation and
supervision, and an active effor t to promote capital market
development. Some of our economies have also found the use of
market-based prudential safeguards to be a useful comple ment but
not a substitute for these preconditions. We asked our Deputies to
work with the IMF and the World Bank to compare the experiences of
eco nomies in managing the capital market liberalization process,
including t he results from the use of macro-prudential measures,
in order to study h ow to promote freer flows of capital while
maintaining macroeconomic and financial stability. We asked for a
report at our next meeting.

39. We asked our Deputies to work with the IMF to examine how to
monitor effectively capital flows, including short-term capital
flows, with a vie w to providing information to the market and
promoting stability.


Strengthening Financial Systems

40. Under our initiative to Strengthen Financial Market Supervision,
two action plans were developed for strengthening training of bank
supervisor s and securities regulators in APEC economies. We endorse
these plans and call for their timely and comprehensive
implementation. We thank the Asi an Development Bank for its
assistance in developing these plans and for its commitment,
together with that of the South East Asian Central Banks Research
and Training Centre (SEACEN) and the Asia-Pacific Regional Commi
ttee of IOSCO, to assist in their implementation. We look forward
to rece iving a progress report at our next meeting. 

41. We welcome other training initiatives launched within our own
region: the joint initiative of Canada and the World Bank to
establish the Toron to International Leadership Centre for
Financial Sector Supervision; the opening of the ADB Institute in
Tokyo; the IMF-Singapore Regional Trainin g Institute (STI); and
bilateral training assistance provided by individu al economies. 

42. We welcome the initiative of the APEC Financiers Group to create
a pr ivate-sector training and education program for financiers
across the APE C region. We call on our APEC Deputies to work
actively with the financie rs on this initiative and look forward to
a status report. 

43. As part of our efforts to draw lessons from the recent crisis
and str engthen our economies, we agreed to launch an initiative to
be co-ordinat ed by Malaysia in conjunction with the World Bank and
the Asian Developme nt Bank, to examine ways of strengthening
corporate governance in our reg ion. This work would recognize work
going on in other fora. As part of th is initiative, we welcomed
Australia's offer to host a seminar to bring t ogether senior
business people from our economies to identify priorities for
reform in this area. We look forward to reviewing a report on this
su bject at our next meeting.