Majority of the Asian nations face the challenges of rising international interest rates and the global turnaround in the credit cycle, risks from rising oil prices and increasing inflationary pressures and risks from global financial imbalances while managing financial stability. While Singapore follows a successful forex reserve management model through a diversified portfolio, China wishes to invest partly in high-yielding assets, from its surging forex reserves.

Financial system stability signifies stability of financial institutions and markets, so that the functions of banking, insurance, securities, etc., besides monetary and fiscal policies are conducted in a seamless and orderly fashion. In a globalized financial environment, financial stability occupies a place of primacy, as it enables the economy to withstand shocks and crises, without disturbing the intermediatory role of banks or the payment processing and settlement systems.

Phases of financial instability could result in episodes of financial shocks or crises, in the form of bank failures, stock market crashes, exchange rate crises, collapse of market liquidity, etc. Financial stability is a function of macroeconomic management, surveillance and transparency, market infrastructure, accounting, auditing and public disclosures, market functioning, conduct, prudential regulation and supervision. This article deals with the experience of major Asian nations like India, China, Hong Kong and Singapore with respect to ensuring financial stability.

Professional Banker Magazine, Financial System, Forex Reserve Management, Business Environment, Macroeconomic Management, Reserve Bank of India, RBI, Foreword Rate Agreements, FRAs, Interest Rate Swaps, Financial Services, Basel-II, Non-Performing Assets, NPAs, Risk Management, Collateralized Borrowing and Lending Obligation, CBLO, Chines Banking System, Rand Merchant Bank.