Asian Financial Stability Board to launch as early as May

An Asian version of the Financial Stability Board will be launched as early as this month, with Korea likely to assume the co-chairmanship of the organization to comprise major Asian countries including Korea, China and Japan.

The launch of the board will add further momentum to regional financial integration recently been pursued by Asian countries.

The Strategy and Financial Ministry and the Financial Services Commission in Seoul said Friday that Korea, China and Japan agreed to establish an Asian version of the board as early as this month.

The three countries have pursued the establishment of the organization from 2007, but the global financial crisis stalled the effort. With the recent surge in financial transactions in Asia and the Financial Stability Board’s decision in its Rome meeting last month to set up regional bodies for each continent, however, the discussion for the Asian board has made speedy progress.

A successor to the Financial Stability Forum set up by the Group of 7 countries in 1999 to prevent another Asian financial crisis and foster international cooperation, the Financial Stability Board is an international body that monitors the macroeconomics and financial conditions of each country and coordinates financial regulation policies with the International Monetary Fund.

The Asian board will include Southeast Asian countries along with the Asian members of the FSB.

The FSB includes central banks and financial regulators of all G-20 economies such as Korea, China, Japan, India and Indonesia, as well as Hong Kong and Singapore.

The Asian board will strengthen regulations on capital and liquidity to enhance the preparedness of large banks in the region against a financial crisis by considering characteristics of emerging Asian economies and reform derivative markets.

Given that fears over inflation and financial imbalance are deepening due to increasing capital inflow to emerging Asian economies in the wake of the global financial crisis, the new organization will strive to stabilize the region’s financial sector.

A government source in Seoul said, “Under the system led by the Financial Stability Board, countries excluding G-20 members, Hong Kong and Singapore couldn’t make their voices heard in policy discussion on global financial stability,” adding, “The inclusion of major Southeast Asian nations in the Asian FSB will allow cooperation on financial stability that considers regional characteristics.”

In particular, the chairmanship of the organization will likely be shared by Korea as Asian countries want Korea to play a mediating role between Japan and China, who are competing for financial hegemony in the region.

The Asian FSB will be co-chaired by an FSB and a non-FSB member country.

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