Ready for the Next Financial Crisis? Strengthening Financial Governance Mechanisms

In recent years, currency volatility among Southeast and East Asian economies has fueled concerns about the possible occurrence of another financial crisis in Asia and the Pacific Region. The Asian financial crisis in 1997 and the global financial crisis in 2008 revealed some serious deficiencies in global financial governance systems. In particular, the International Monetary Fund’s crisis resolution mechanisms were widely criticized. In the context of this history, this paper studies the development of national, regional and global financial governance in the aftermath of the Asian and global financial crises. The discussion examines how individual economies as well as regional and global governance actors have strengthened their financial systems, promoted financial cooperation, reformed key financial institutions and established alternative institutions. Although the development of financial governance mechanisms at national, regional and global levels have created these three lines of defence, policymakers in Asia and the Pacific need to prepare for the next financial crisis in an increasingly interconnected world economy. This paper’s authors propose some policy measures to improve the vigilance and adaptability of financial governance mechanisms in the face of ongoing challenges and uncertainties.