Contents -- FOREWORD -- ACKNOWLEDGMENTS -- ACRONYMS AND ABBREVIATIONS -- Overview and Summary -- The Changing Regional Context -- Where Do the East Asian Financial Markets Stand Today? -- The Road to Robust Markets -- Conclusions -- Outline of the Report -- 1 Moving Toward a More Robust and Diversified Financial System -- 2 Regional Cooperation as a Means to Diversify Financial Markets -- Extent of Financial Integration -- Enhancing Integration through Regional Initiatives -- Both Regional and Domestic Policy Measures Are Needed -- 3 Building Better Institutional Infrastructure -- The Exercise of Corporate Governance: An Overview -- Shareholder Rights, Board Responsibilities, and Their Implementation -- Creditors' Rights and Their Implementation -- Accounting Standards and Practices -- Summary -- 4 Fostering an Efficient and Sound Banking Sector -- Developments in East Asian Banking Since the Financial Crisis -- Improving the Efficiency and Enhancing the Reach of the Banking Sector -- Ensuring the Stability of the Banking System -- 5 Deepening the Securities Markets -- Developments in East Asian Securities Markets Since the Financial Crisis -- Deepening the Securities Markets -- Strengthening the Regulatory Framework for Securities Markets -- Conclusions -- 6 Strengthening the Investor Base -- Pension Funds -- Insurance Sector -- Mutual Funds -- 7 Developing Sound Markets for Risk Sharing -- Derivatives Markets -- Securitization -- 8 Dealing with Growing Linkages Across Markets -- Trends and Issues in Supervision -- The Pros and Cons of Unified Supervision -- Implementation Issues in Moving to Unified Supervision -- APPENDIXES -- Appendix 1: Statistical Tables -- Appendix 2: International Financial Reporting -- Appendix 3: Basel II Issues -- ENDNOTES -- REFERENCES -- INDEX -- BOXES -- 1.1 Importance of a Diversified Financial System.

2.1 Tests of Integration in Equity Markets -- 2.2 The Asian Bond Fund Initiative -- 2.3 Rationale and Feasibility of Setting Up a Regional Credit-Rating Agency -- 3.1 Key Elements for Well-Functioning Credit Information Systems -- 3.2 Summary of OECD Corporate Governance Principles -- 3.3 Selected Amendments to Corporate Governance in China's Company Law -- 3.4 Principles and Guidelines for Effective Insolvency and Creditor Rights -- 4.1 Reasons for the Expansion in Consumer Lending -- 4.2 The Hong Kong Mortgage Corporation -- 4.3 Cagamas: The National Mortgage Corporation in Malaysia -- 4.4 Progress in Corporate De-Leveraging and Corporate Performance -- 4.5 Impact of Structural Changes on Banking Sector Efficiency: Empirical Analysis -- 4.6 Effects of the Entry of Foreign Banks: Cross-Country Findings -- 4.7 Factors Affecting Availability of Bank Finance: Cross-Country Findings -- 4.8 Enhancing the Environment for the Provision of Microfinance by Banks -- 4.9 Deposit-Insurance System: Features of Good Design -- 4.10 Combating Money Laundering and Financing of Terrorism -- 5.1 Measures to Enhance Liquidity in the Domestic Bond Market in Malaysia -- 5.2 Trading Fixed-Income Instruments on the Exchange in Thailand -- 5.3 Repos and Securities Lending -- 5.4 New Ways for Medium-Size Companies to Access Capital: Mexico's New Securities Law -- 5.5 Demutualization: Corporatization of the Stock Exchange -- 6.1 In the Philippines, Outdated Legislation Is Delaying the Growth of the Investment Fund Sector -- 6.2 Collapse of Fixed-Income Funds in Korea in 1999 -- 6.3 Enforcement Failure: Fixed-Income Funds in Indonesia -- 7.1 Main Features of Derivatives Markets -- 7.2 Failure of a Futures Exchange: The Shanghai Stock Exchange -- 7.3 Principles of Securitization -- 7.4 The KOROmas Fund Ltd. -- 7.5 The Bauhinia Program -- 7.6 Singa Secured Assets -- FIGURES.

1 GDP and Investment -- 2 Assets of the Financial Sector -- 3 Importance of Bank Assets Relative to Equity and Bond Markets -- 4 Efficiency of Equity Markets -- 5 Factors Affecting the Efficiency of Securities Markets -- 6 Insurance Penetration and Density -- 7 Structure of the Report -- 1.1 Assets of the Financial Sector -- 1.2 Importance of Bank Assets Relative to Equity and Bond Markets -- 1.3 Assets of Institutional Investors -- 3.1 Core Attributes and Underpinnings of Well-Functioning Financial Systems -- 3.2 Disclosure Practiced by Listed Firms -- 4.1 Indicators of Banking Sector Efficiency -- 4.2 Indicators of Banking System Soundness -- 4.3 Performance of East Asian Banks Relative to Those of Other Regions -- 4.4 Deposit-Money Banks' Claims on the Private Sector and Government -- 4.5 Size of Mortgage Debt -- 4.6 Residential Mortgage Markets in China -- 4.7 Indicators of the Reach of Banking Services -- 4.8 Degree of Competition in Banking -- 4.9 Regulations Affecting Ease of Entry and Exit -- 4.10 Schema of Different Banking Strategies and Bank Size -- 4.11 Compliance with Basel Core Principles for Banking Supervision -- 5.1 Number of Listed Firms -- 5.2 Proportion of Shares That Are Inaccessible to Foreigners -- 5.3 Equity Market Efficiency -- 5.4 Equity Market Stability -- 5.5 Factors Affecting the Efficiency of Securities Markets -- 6.1 Asset Class Exposure of Investment Funds -- 7.1 Liquidity Ratios in Equity Derivatives and Cash Markets -- 7.2 Participants in Key East Asian Derivatives Markets, 2004 -- 7.3 Stylized Elements and Sequencing of Derivatives Markets Development -- 7.4 Composition of Cross-Border Securitization Deals -- 7.5 Mechanisms to Mitigate Credit and Structural Risks in More Complex Securitization -- TABLES -- 1 Structure of Financial Systems -- 2 Bond Markets: Breakdown by Type of Bond Issuer.

3 Liquidity Indicators in the Bond Markets -- 4 Market Infrastructure Scores -- 5 Factors Affecting Transaction Costs in Bond Markets -- 6 Main Over-the-Counter and Exchange-Traded Derivatives in East Asia -- 7 Assets of Institutional Investors -- 8 Indicators of Concentration in the Insurance Industry -- 9 Status of Key Elements Needed for Securitization -- 1.1 Structure of Financial Systems -- 2.1Holdings of Foreign Assets and Liabilities with the Rest of the World -- 2.2 Consolidated Bank Claims -- 2.3 Portfolio Investment Assets and Liabilities -- 2.4 Correlation in Equity Returns -- 2.5 Correlation in Local-Currency Bond Returns -- 2.6 Regulations Affecting Cross-Border Flows -- 2.7 Tax Treatment of Returns from Foreign Investors' Holdings of Local Bonds -- 2.8 Availability and Access to Derivatives Markets for Cross-Border Investors -- 3.1 Corporate Governance Scores-A Market Perspective -- 3.2 Disclosure by Top Five Banks in Each Jurisdiction -- 3.3 Infrastructure for Credit Reporting and Financial Information -- 3.4 Assessments of Shareholder Rights and Board Responsibilities -- 3.5 Treatment of Real Property -- 3.6 Treatment of Movable Property -- 3.7 Assessment of Unsecured and Secured Creditor Rights -- 3.8 Assessment of Insolvency Regimes -- 4.1 Changes in the Structure and Ownership of Commercial Banks -- 4.2 Mortgage Rates Offered by Banks in Selected Economies -- 4.3 Predicted Shares of Households and Small Firms Using Banking Services -- 4.4 Measures of Consolidation and Diversification of Banking Sector Activities -- 4.5 Aspects of Deposit Insurance Schemes in East Asia -- 4.6 Main Features and Key Requirements for the Different Approaches Under Basel II -- 5.1 Size of Equity Markets (Market Capitalization) -- 5.2 Size of Bond Markets (Domestic Bonds Outstanding) -- 5.3 Indicators of Access to Stock Markets for Firms.

5.4 Breakdown by Type of Bond Issuer -- 5.5 Liquidity in Equity Markets -- 5.6 Trading Costs in Equity Markets -- 5.7 Liquidity in Bond Markets -- 5.8 Where Countries Stand on Elements Affecting Pre-Settlement and Settlement Risks -- 5.9 Scores on Clearance and Settlement Infrastructure and Post-Settlement -- 5.10 Key Factors Affecting Liquidity and Efficiency of Securities Markets -- 5.11 Ratings of Securities Laws on Disclosure Requirements, Liability Standards, and Anti-Self-Dealing -- 5.12 Status of Demutualization -- 6.1 Assets of Institutional Investors -- 6.2 Asset Size and Type of the Most Important Pension Schemes -- 6.3 Broad Allocation of Pension Fund Assets -- 6.4 Coverage Ratios of Pension Schemes -- 6.5 Nominal Contribution Rates of Main Pension Schemes -- 6.6 Indicators of Development of the Insurance Sector -- 6.7 Indicators of Concentration in the Insurance Sector -- 6.8 Scope of Investment Regulations in the Life Insurance Sector -- 6.9 Governance Structures of Mutual Funds -- 7.1 Main Over-the-Counter and Exchange-Traded Derivatives -- 7.2 Derivative Products and Turnover -- 7.3 Status of Infrastructure for Derivatives Markets -- 7.4 Cross-Border Securitization Transactions -- 7.5 Status of Key Elements Needed for Securitization -- 7.6 Types of Risks in Securitization Transactions -- 8.1 Risk Transfers Among Banks, Insurance Companies, and Capital Markets -- 8.2 Advantages and Disadvantages of Different Models of Regulatory Structure -- 8.3 Major Implementation Issues Reported by Countries in Moving to Unified Supervision -- 8.4 Average Time Taken to Complete Key Tasks in Moving to Unified Supervision.