Twenty-five years and beyond: the partnership between the BIS and Asia

Speech by Mr Agustín Carstens, General Manager of the BIS, at the High-level Conference co-hosted by the Hong Kong Monetary Authority and the BIS, Hong Kong SAR, 28 November 2023.

This event marks two important anniversaries. The first is the 30th anniversary of the HKMA. The second is the 25th anniversary of the BIS's Representative Office for Asia and the Pacific, which is also based in Hong Kong SAR.

Establishing our Asian Office – our first physical presence outside Europe – was a significant step for the BIS. It signalled our evolution into a truly global institution that serves the entire central banking community. I would like to use my remarks to reflect on the journey we have taken to bring more of the Asia-Pacific region to the BIS and more of the BIS to the region.

Starting the Asian Representative Office was an eventful and rewarding enterprise for the BIS. But while it seems obvious today that the BIS needs to be in Asia, we should recall that 25 years ago the case was not so clear-cut. When we founded the Office in 1998, the region still bore the scars of the Asian financial crisis. Some wondered whether the regional economic miracle, which even then had lifted hundreds of millions of people out of poverty, had run its course.

The region has certainly proved the sceptics wrong with its impressive performance over the past 25 years. It has grown by an average of 5.5%, accounting for two thirds of global growth over that time. As a result, Asia's share in the global economy has risen from around 30% in 1998 to over 45% today. The region is also home to three of the world's five largest economies: China, Japan and India. Most importantly, Asia's strong economic performance has had a transformative impact on its inhabitants; GDP per person has increased from less than $4,000 in 1998 to $18,000 today. 

Catering to this dynamic and innovative region forced the BIS to change. Our banking services evolved. And our economists explored new topics with fresh perspectives. We also stepped up our innovation efforts by capitalising on the vibrant fintech ecosystem in the region. It is no coincidence that two of the three initial BIS Innovation Hub Centres are located in Asia.   

We are fortunate to have had a strong and committed partner in the HKMA working alongside us, so thank you, Chief Executive Yue and your colleagues at the HKMA. I would also like to pay special tribute to the Asian Consultative Council (ACC), which was set up in 2001 and includes the Governors of the 13 BIS member central banks from the region. The ACC has helped guide the BIS's work in Asia and the Pacific and conveys the region's experiences and interests to the wider BIS membership. 

Looking back, three aspects of our work in Asia and the Pacific stand out.

First, we have learned from the region. A concrete example of this was our work on the development of macro-financial stability frameworks, which was inspired in part by the successful steps regional central banks had taken to keep inflation low while preventing the build-up of financial imbalances and managing at times volatile global financial flows. In addition, analysis on several issues of importance, such as the revolution in digital finance, has enabled the BIS membership to better comprehend policymaking in Asia and discuss possible lessons for other regions.

Second, we have sought to serve the region. We have prioritised our customer needs and strengthened our role as a financial services provider by expanding our range of products, deepening green bond markets and providing liquidity to regional central banks during times of stress.

Third, we have grown alongside the region. Since establishing the Asian Representative Office, our operations, membership and footprint have all grown. The number of BIS member central banks in the region has risen from seven in 1998 to 13 today. Our own presence in the region now consists of almost 60 staff members. We have established Innovation Hub Centres in Hong Kong and Singapore. We have enhanced our outreach and engagement with our Asian constituencies, including by strengthening existing, and building new, partnerships and sharing knowledge of developments around financial technology-related themes of critical importance to the regional central banks, not least the development of central bank digital currencies. And our regional members are playing a bigger and more influential role within the BIS. For example, Governors from the region chair the Committee on the Global Financial System and our emerging market economies meeting.

Looking back, there is much to be proud of. Looking forward, new challenges await us.

At today's conference, we will hear about many of these challenges. They include high inflation, heightened financial stability risks and ingrained structural headwinds to growth, including from global economic fragmentation, slow productivity growth and demographic change.

Each central bank will have to meet these tests in their own way. But in doing so, much can be learned from the Asian experience of the past quarter century. In my view, several core strengths stand out.

One is the criticality of fostering robust policy frameworks and deploying them nimbly. The success of many Asian central banks in combating high inflation in the aftermath of the pandemic was no accident. Their decades of work in building and strengthening macro-financial stability frameworks played a key role. In the wake of the Asian financial crisis, to ensure financial stability going forward, authorities in Asia experimented with tools and policy frameworks that were not necessarily part of the accepted wisdom of the time, including macroprudential policies which could provide a counterweight to the financial cycle. 

Sustaining integration both within the region and with the rest of the world is another theme. Asia is one of the biggest beneficiaries of the existing multilateral system and among the strongest advocates for sustaining and strengthening such a system. The BIS, as one of the oldest global financial institutions, is ready and willing to be a strong partner for our Asian member central banks in such endeavours and in the provision of global and regional public goods.

A final lesson is the value of riding the tides of innovation to build a more inclusive and resilient economy. Let me highlight the financial sector. Financial innovation and new technologies are changing both the landscape and the possibilities for central banking. Asia has been on the frontline of much digital innovation in the past decade, including the development of digital identification and payment platforms that have brought hundreds of millions of individuals into the formal financial system in China and India. As I mentioned earlier, we at the BIS have worked closely with central banks in the region through the Innovation Hub Centres we set up, including the two in Hong Kong and Singapore. We are doing our part.

Let me conclude.

We have witnessed remarkable achievements in Asia in the past few decades. The region has become richer, more innovative and more resilient. That said, the region faces significant challenges on the horizon. Some, including slowing productivity growth, unfavourable demographics, climate change and the green transition, have already begun to bite.

How we address these challenges now will determine how well we fare in the next few decades and beyond.

We need to seize the opportunity and shape our future through collaboration, innovation and investing in strong fundamentals, including in soft infrastructure. The BIS stands ready to be a strong and committed partner when you embark on the next leg of the journey. The BIS's Asian Office in Hong Kong is a pillar in this pursuit. 

I hope that our discussions today will contribute to that end.

Thank you.