Risk to Asian financial stability remains

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CEBU: The impact on Asian financial markets of the United States’ monetary policy, particularly the stimulus tapering, has been “so far so good,” according to a regional consultative group, but it warns of remaining risk and urges the region to constantly watch out for any potential shifts in global risk appetite.

Regional discussions on global risks and its possible impact on Asia are essential to maintaining stability in Asia’s financial markets, Bangko Sentral ng Pilipinas (BSP) and members of the Financial Stability Board (FSB) Regional Consultative Group for Asia (RCGA) said in their sixth meeting held here late last week.

The group underscored the unwinding of unconventional monetary policy, particularly in the US, and its potential implications for Asia as a vital matter to monitor.

Likewise, local conditions such as the business cycle, developments in the financial system, and macroeconomic policy are highlighted as an important consideration when it comes to confronting risks in the financial markets.


BSP Governor Amando Tetangco Jr. said the impact of US tapering on emerging markets in Asia has been “so far so good.”

“Of course this is not to say that there are no risks remaining, and it means that we have to continue to be watchful of the potential bad shifts in global risk appetite compared to risks to emerging markets,” he said, noting that it is important to look at both what is happening globally and in the domestic economy.

In March, the US Federal Open Market Committee decided to make the third monthly $10 billion cut in bond purchases since December, pulling the program down to $55 billion from $85 billion.

“Given the developments [in the financial markets]until the first quarter and even the announcement of third tapering, it looks like the markets have not violently responded to this. There is more information now, to be sure, but there’s still no concrete information at this point, so we need to be cautious,” he added.

Other issues discussed in the FSB RCGA meeting were financial market infrastructure reforms, natural disasters and contingency planning for the financial sector and the FSB’s policy priorities and work plan.

The FSB is an international organization established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability.

It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.

The FSB RCGA is co-chaired by the BSP Governor and Masamichi Kono, Vice Commissioner for International Affairs at the Financial Services Agency of Japan.

Membership includes financial authorities from Australia, Cambodia, China, Hong Kong SAR, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Thailand and Vietnam.

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