East Asian Finance: The Road to Robust Markets

Contents......Page 7
FOREWORD......Page 11
ACKNOWLEDGMENTS......Page 13
ACRONYMS AND ABBREVIATIONS......Page 14
The Changing Regional Context......Page 15
Where Do the East Asian Financial Markets Stand Today?......Page 17
The Road to Robust Markets......Page 24
Conclusions......Page 35
7 Structure of the Report......Page 36
1.1 Importance of a Diversified Financial System......Page 39
Extent of Financial Integration......Page 43
Enhancing Integration through Regional Initiatives......Page 48
Both Regional and Domestic Policy Measures Are Needed......Page 57
3 Building Better Institutional Infrastructure......Page 59
3.1 Core Attributes and Underpinnings of Well-Functioning Financial Systems......Page 60
3.2 Disclosure by Top Five Banks in Each Jurisdiction......Page 63
Creditors' Rights and Their Implementation......Page 68
Accounting Standards and Practices......Page 75
Summary......Page 76
Developments in East Asian Banking Since the Financial Crisis......Page 77
Improving the Efficiency and Enhancing the Reach of the Banking Sector......Page 98
4.10 Schema of Different Banking Strategies and Bank Size......Page 103
Developments in East Asian Securities Markets Since the Financial Crisis......Page 115
5.7 Liquidity in Bond Markets......Page 123
5.4 New Ways for Medium-Size Companies to Access Capital: Mexico's New Securities Law......Page 136
Conclusions......Page 140
Pension Funds......Page 143
Insurance Sector......Page 152
6.7 Indicators of Concentration in the Insurance Sector......Page 154
7.1 Main Features of Derivatives Markets......Page 163
7.3 Stylized Elements and Sequencing of Derivatives Markets Development......Page 171
8 Dealing with Growing Linkages Across Markets......Page 183
8.1 Risk Transfers Among Banks, Insurance Companies, and Capital Markets......Page 184
The Pros and Cons of Unified Supervision......Page 185
8.2 Advantages and Disadvantages of Different Models of Regulatory Structure......Page 186
Appendix 1: Statistical Tables......Page 191
Appendix 2: International Financial Reporting......Page 205
Appendix 3: Basel II Issues......Page 209
ENDNOTES......Page 213
REFERENCES......Page 223
INDEX......Page 227
2.1 Tests of Integration in Equity Markets......Page 47
2.2 The Asian Bond Fund Initiative......Page 50
2.3 Rationale and Feasibility of Setting Up a Regional Credit-Rating Agency......Page 55
3.1 Key Elements for Well-Functioning Credit Information Systems......Page 64
3.3 Infrastructure for Credit Reporting and Financial Information......Page 65
3.4 Assessments of Shareholder Rights and Board Responsibilities......Page 66
3.4 Principles and Guidelines for Effective Insolvency and Creditor Rights......Page 69
4.1 Reasons for the Expansion in Consumer Lending......Page 84
4.2 Mortgage Rates Offered by Banks in Selected Economies......Page 89
4.3 Cagamas: The National Mortgage Corporation in Malaysia......Page 90
4.4 Progress in Corporate De-Leveraging and Corporate Performance......Page 91
4.4 Measures of Consolidation and Diversification of Banking Sector Activities......Page 96
4.6 Effects of the Entry of Foreign Banks: Cross-Country Findings......Page 101
4.7 Factors Affecting Availability of Bank Finance: Cross-Country Findings......Page 104
4.11 Compliance with Basel Core Principles for Banking Supervision......Page 105
4.9 Deposit-Insurance System: Features of Good Design......Page 107
4.10 Combating Money Laundering and Financing of Terrorism......Page 110
5.1 Measures to Enhance Liquidity in the Domestic Bond Market in Malaysia......Page 126
5.2 Trading Fixed-Income Instruments on the Exchange in Thailand......Page 128
5.3 Repos and Securities Lending......Page 130
5.12 Status of Demutualization......Page 137
6.9 Governance Structures of Mutual Funds......Page 157
6.2 Collapse of Fixed-Income Funds in Korea in 1999......Page 159
6.3 Enforcement Failure: Fixed-Income Funds in Indonesia......Page 161
7.2 Failure of a Futures Exchange: The Shanghai Stock Exchange......Page 166
7.3 Principles of Securitization......Page 172
7.5 The Bauhinia Program......Page 174
7.4 Cross-Border Securitization Transactions......Page 175
1 GDP and Investment......Page 16
1 Structure of Financial Systems......Page 18
3 Importance of Bank Assets Relative to Equity and Bond Markets......Page 20
3 Liquidity Indicators in the Bond Markets......Page 22
5 Factors Affecting the Efficiency of Securities Markets......Page 25
6 Insurance Penetration and Density......Page 31
1.1 Structure of Financial Systems......Page 41
1.3 Assets of Institutional Investors......Page 42
3.2 Disclosure Practiced by Listed Firms......Page 62
4.2 Indicators of Banking System Soundness......Page 80
4.3 Performance of East Asian Banks Relative to Those of Other Regions......Page 82
4.4 Deposit-Money Banks' Claims on the Private Sector and Government......Page 83
4.5 Size of Mortgage Debt......Page 86
4.6 Residential Mortgage Markets in China......Page 87
4.7 Indicators of the Reach of Banking Services......Page 94
4.8 Degree of Competition in Banking......Page 99
4.9 Regulations Affecting Ease of Entry and Exit......Page 100
5.2 Proportion of Shares That Are Inaccessible to Foreigners......Page 118
5.4 Equity Market Stability......Page 122
5.5 Factors Affecting the Efficiency of Securities Markets......Page 124
6.1 Asset Class Exposure of Investment Funds......Page 156
7.2 Participants in Key East Asian Derivatives Markets, 2004......Page 168
7.4 Composition of Cross-Border Securitization Deals......Page 176
7.5 Mechanisms to Mitigate Credit and Structural Risks in More Complex Securitization......Page 180
2 Bond Markets: Breakdown by Type of Bond Issuer......Page 19
4 Market Infrastructure Scores......Page 27
5 Factors Affecting Transaction Costs in Bond Markets......Page 28
6 Main Over-the-Counter and Exchange-Traded Derivatives in East Asia......Page 29
7 Assets of Institutional Investors......Page 30
8 Indicators of Concentration in the Insurance Industry......Page 32
9 Status of Key Elements Needed for Securitization......Page 33
2.2 Consolidated Bank Claims......Page 44
2.3 Portfolio Investment Assets and Liabilities......Page 45
2.4 Correlation in Equity Returns......Page 46
2.5 Correlation in Local-Currency Bond Returns......Page 49
2.6 Regulations Affecting Cross-Border Flows......Page 52
2.7 Tax Treatment of Returns from Foreign Investors' Holdings of Local Bonds......Page 53
2.8 Availability and Access to Derivatives Markets for Cross-Border Investors......Page 54
3.1 Corporate Governance Scores—A Market Perspective......Page 61
3.5 Treatment of Real Property......Page 70
3.6 Treatment of Movable Property......Page 71
3.7 Assessment of Unsecured and Secured Creditor Rights......Page 72
3.8 Assessment of Insolvency Regimes......Page 73
4.1 Changes in the Structure and Ownership of Commercial Banks......Page 78
4.3 Predicted Shares of Households and Small Firms Using Banking Services......Page 95
4.5 Aspects of Deposit Insurance Schemes in East Asia......Page 108
4.6 Main Features and Key Requirements for the Different Approaches Under Basel II......Page 111
5.2 Size of Bond Markets (Domestic Bonds Outstanding)......Page 116
5.3 Indicators of Access to Stock Markets for Firms......Page 117
5.4 Breakdown by Type of Bond Issuer......Page 119
5.5 Liquidity in Equity Markets......Page 120
5.6 Trading Costs in Equity Markets......Page 121
5.9 Scores on Clearance and Settlement Infrastructure and Post-Settlement......Page 129
5.10 Key Factors Affecting Liquidity and Efficiency of Securities Markets......Page 131
5.11 Ratings of Securities Laws on Disclosure Requirements, Liability Standards, and Anti-Self-Dealing......Page 135
6.2 Asset Size and Type of the Most Important Pension Schemes......Page 144
6.3 Broad Allocation of Pension Fund Assets......Page 145
6.4 Coverage Ratios of Pension Schemes......Page 146
6.5 Nominal Contribution Rates of Main Pension Schemes......Page 148
6.6 Indicators of Development of the Insurance Sector......Page 153
6.8 Scope of Investment Regulations in the Life Insurance Sector......Page 155
7.1 Main Over-the-Counter and Exchange-Traded Derivatives......Page 164
7.2 Derivative Products and Turnover......Page 165
7.3 Status of Infrastructure for Derivatives Markets......Page 170
7.5 Status of Key Elements Needed for Securitization......Page 178
7.6 Types of Risks in Securitization Transactions......Page 179
8.3 Major Implementation Issues Reported by Countries in Moving to Unified Supervision......Page 187
8.4 Average Time Taken to Complete Key Tasks in Moving to Unified Supervision......Page 188