This paper outlines the opportunities and pitfalls for risk analysts in interpreting the information embedded in international and sectoral balance sheets. It places an emphasis on the different risks posed by net financial stock imbalances and the cross-holding of large stocks of gross financial assets and gross financial liabilities. It argues that it is important to supplement sectoral-level data with more disaggregated levels of data, in view of the importance of intra-sectoral financial linkages and the heterogeneity in portfolios and funding mechanisms within sectors. Finally, the growing internationalisation of financial balance sheets means that it is important to take a unified approach to the joint analysis of international and sectoral balance sheets.

In relative terms, Asia came through the global financial crisis relatively well. In part, this can be attributed to its conservative approach to international financial integration. At the same time, financial globalisation means that Asia cannot be fully insulated from international financial shocks. Moreover, it is likely that the rest of the world will undergo a redesign of its international financial profile, such that Asia will also have to adapt. All in all, there is likely to be considerable convergence in the composition of international balance sheets across Asia and the rest of the world. In turn, this is likely to be associated with a higher degree of regional financial integration within Asia. These structural changes call for the careful design of a prudential macro-financial policy framework.