The Bank for International Settlements (BIS), the banker to the world's central banks, has chosen Hong Kong as the site for its first overseas office, in a move aimed at strengthening co-operation with central banks in the region. The Government yesterday said the Switzerland-based BIS would set up the representative office in July and use it as its regional office for Asia and the Pacific. The decision to set up an office in Asia comes as authorities worldwide are considering ways to strengthen supervision and regulation of the financial sector in the wake of the Asian crisis. A BIS source said last night it had been contemplating an Asian office long before the crisis hit. 'The reason the BIS is setting up a regional office is that it used to be a fairly bureaucratic organisation, at least in the eyes of many, despite the fact that it has got a broad government membership,' he said. 'But the BIS wants to be more globally oriented and a more effective institution and that means it isn't so easy to deal with things from an office in Basle.' The decision was welcomed by the Government and the banking community which said it showed international confidence in Hong Kong. Last year, Hong Kong lost out to Tokyo as the chosen location for the International Monetary Fund's newly established Asian headquarters. Set up in 1930, the BIS is an organisation of central banks and monetary authorities. It developed standards for banking supervision and payment systems that Hong Kong and most countries follow. One of these is the 8 per cent capital adequacy ratio which prescribes the amount of capital banks need to put up when extending loans to ensure prudent management. BIS membership consists of 32 central banks, notably the Group of 10, and most European countries. The Hong Kong Monetary Authority joined the BIS in November 1996, while at the same time, the mainland central bank, the People's Bank of China, was asked to participate as a separate member. Financial Secretary Donald Tsang Yam-kuen said the Government fully supported the activities of the BIS and welcomed its plan to set up its first overseas office in Hong Kong. 'As a leading international financial centre, Hong Kong is well placed to be the seat of the representative office in Asia,' he said. 'Hong Kong stands to benefit from being the focal point of BIS activities in the region.' Monetary authority chief executive Joseph Yam Chi-kwong said: 'The establishment of the representative office in Hong Kong will be an important milestone in the development of Hong Kong's relationship with the BIS.' Hong Kong Financial Markets Association president Andrew Fung Hau-chung said the move would boost investor confidence in Hong Kong and Asia as a whole. He did not believe the decision to set up an office in Asia was the result of the regional financial turmoil. 'Even without the financial turmoil, the BIS is under pressure to tighten up its connection with the Asian central banks,' he said. 'The Asian financial markets are playing an increasingly important role in the world. In particular, China is opening up its financial market, which is huge.' He believes Hong Kong was chosen by the BIS because of its location. 'In terms of foreign exchange trading volume in Asia, the trading in Tokyo and Singapore is more than Hong Kong,' he said. He said the geographical location of Hong Kong made it the 'best place in Asia to allow the BIS to connect with other Asian countries'.