West can look to Asia to see future of regulation

By Rachel Armstrong

SINGAPORE | Mon Feb 28, 2011 6:39am EST

SINGAPORE (Reuters) – Regulators in the United States and Europe have learned some hard lessons from the global financial crisis and should now look to Asia to see how many of their new tougher rules governing financial markets will work out.

A lot of regulations under consideration in the developed world to rein in the excessive risk-taking of banks blamed in part for the global financial crisis are already in place in Asia, which came through the crisis relatively unscathed.

The new buzzwords attached to western countries’ regulatory proposals include macroprudential lending controls and counter-cyclical credit buffers, but these are tools most Asian financial centers adopted in the wake of the region’s own financial crisis in 1997.

“In all sorts of areas, the Asian markets haven’t had the same problems the U.S. and European markets had and that in part is because of some of the changes which were made 12 years ago after the Asia crisis,” said Martin Wheatley, chief executive of Hong Kong’s Securities and Futures Commission.

Asian-style regulation includes tougher capital standards for banks, lending controls such as limiting loan-to-value ratios for mortgages and caps on debt servicing.

In the buildup to the global crisis, there were no caps imposed by regulators in western Europe or the United States on loans for houses. Some banks even loaned out amounts that exceeded the value of the house in question.

In comparison, many Asian countries have upper limits for home loans. Hong Kong, for example, caps mortgages at a maximum of 70 percent of the value of the home and lower for more expensive properties.

The summit will bring in top policymakers and financial leaders from Asia, Europe and the U.S..

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