Hong Kong is to play a key role in efforts to reform financial markets after it was announced that Securities and Futures Commission chairman Andrew Sheng will head an ad hoc working group to look at how best to strengthen international financial systems. The move was greeted with surprise in some quarters that, given the Government's intervention in the stock market last year, it should now be playing a leading role in financial market development. 'It hardly led by example,' one analyst said yesterday. International financial reform has been on the economic policy-making agenda since financial crises ripped through Asia, Russia and Latin America in 1997 and last year. Governments have been working hard to see how financial markets can be made more robust to cope with pressures caused by sudden movements in capital flows or the flight of investor confidence. Mr Sheng is to look at how best to implement agreed international standards to boost financial systems and how to motivate governments to pursue prudent economic policies, so that they can avoid future market volatility. The working group is to report to the Financial Stability Forum, set up earlier this year by the Group of Seven leading industrialised nations to discuss reforms of the financial 'architecture'. Mr Sheng must determine how best to make countries implement standards and allow procedures for verification. The group will also look at transparency issues to ensure that countries detail how much progress they are making towards implementing standards, and see how markets can reward progress that has been made. This will mean identifying the set of rules most relevant to strengthening financial systems, and look at what incentives can be given to ensure that such rules are followed.