THE report on the Allied Group has demonstrated once again the weaknesses in international banking supervision. It has shown how easy it is to hide behind a legal system deliberately aimed at providing a level of secrecy which is not available in other well-developed financial centres. Supervisors elsewhere have been alerted by the lessons they learned from the strange animal called Bank of Credit and Commerce International. The intricacy of transactions done across wide geographical areas, taking advantage of the loopholes in the supervision of banks with international operations, are still fresh in people's memories. The use of agents registered in far-away places as a conduit for the improper transmission of funds continues to cause alarm in the banking community. Banking supervisors continue to play a losing game and a reactive role. Sometimes, no one realises the loophole exists until the horse and cart has driven through it. The world of banking is moving rapidly, both vertically and horizontally. The complexities of banking products and their quick evolution have given supervisors enough headaches. Catching up with these new developments with unimaginable risks has taken up much of their time. On the other hand, the vast geographic span of banking operations, criss-crossing different jurisdictions, adds further to the problem. The search for a uniform and widely agreed system of supervision in such a diverse industry will always lag behind the rapid expansion of international banks. The Allied investigations highlight another uncharted area - co-operation between banking and securities supervisors in monitoring banks' transaction. According to the deputy chief executive of the Hong Kong Monetary Authority, David Carse, US supervisors are particularly alarmed by the lack of sufficient supervision and disclosure in those offshore centres. In the swirling world of international banking in Hong Kong, can we be so sure that a supervisor stands guard at every loophole?