Asian Development Bank (ADB) President Haruhiko Kuroda Thursday proposed establishing an "Asian Financial Stability Dialogue" to coordinate regulatory development and monitor potential vulnerabilities in the region's markets and financial systems.

The most recent bout of global financial market turmoil illustrates the urgent need for central banks and regulators to build a cogent and pro-active plan to better preserve regional financial stability, Kuroda said at the ADB headquarters in Manila.

A new wave of financial tsunami triggered by Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank which filed for bankruptcy protection on Monday, has knocked Asian banking stocks and prompted central banks to pump billions into strained money markets.

"It's now time for Asia to move forward on its path toward greater financial integration and to develop the foundations for regional financial stability," Kuroda said.

The proposed "Asian Financial Stability Dialogue", which would include finance ministry and central bank officials, financial regulators and supervisors, and market participants, could use early warning systems and other mechanisms to improve surveillance of the region's financial markets, Kuroda said.

Asian financial markets and economies have so far weathered the current global financial storm relatively well, "but we cannot take this for granted," he added.

Kuroda warned that vulnerabilities and risks to the region's financial systems remain. Authorities are working hard to contain inflationary pressures against the risk of slowing economic activity, for example. And several asset markets, particularly real estate, also show potential vulnerability to shocks.

"Our region requires deeper and more innovative financial markets. Bank finance and equity markets still dominate Asia. Debt markets are the next stage and we have seen progress," Kuroda said.

Asia needs to promote consistent standards, harmonize prudential indicators, and establish standards for governance and transparency to facilitate domestic and international investment, he added.

Financial integration in the region has lagged despite the rapid growth in regional trade integration. Asia is still dependent on more mature markets in Europe and North America to intermediate its large savings than doing it through its own markets, according to ADB.

(Xinhua News Agency September 18, 2008)