Booster dose for regional finance | business | Hindustan Times
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Booster dose for regional finance

Asian Development Bank (ADB) President Haruhiko Kuroda proposes new forum to give a leg-up to regional financial stability, reports HT Correspondent.

business Updated: Sep 19, 2008 21:34 IST
HT Correspondent

Asian Development Bank (ADB) President Haruhiko Kuroda has proposed establishing an “Asian Financial Stability Dialogue” to coordinate regulatory development and monitor potential vulnerabilities in the region’s markets and financial systems.

Speaking at an ongoing conference “Restructuring Beyond the Subprime” in Manila, Kuroda said that the most recent bout of global financial market turmoil illustrates the urgent need for central banks and regulators to build a cogent and pro-active plan to better preserve regional financial stability.

“It’s now time for Asia to move forward on its path toward greater financial integration and to develop the foundations for regional financial stability,” Kuroda said.

India and Japan have already agreed to ink a $3-billion bilateral currency swap agreement aimed at preventing adverse contagion effects during crises, fuelled by speculative investment.

Currency swaps involve an exchange of cash flows in two different currencies. By its special nature, these instruments are used for hedging risk arising out of volatility in the foreign exchange markets.

The agreement would effectively mean that Japan will accept rupees and give dollars to India up to a stipulated limit, and similarly India will take yen and send dollars to Japan if speculators seek to thrash down the respective currencies.

The East Asian countries and Japan have already signed currency swap agreements also referred as the Chiang Mai Initiative, to prevent a crisis that rocked the region in 1997 as many currencies went into a tailspin.