Hong Kong Monetary Authority Chief Executive Joseph Yam warns people about the possibility of a "second wave" in the continuing global financial crisis.
"This may have surprised some people, but I hope they will understand I was trying to alert them to developments that may affect them so that they can take appropriate preventive measures to protect themselves," he writes in his weekly column Viewpoint on Thursday.
"With the financial crisis far from over, there is a need for continued vigilance from everyone," he says.
He says the likely further developments are very much an extension of the earlier ones, in that financial institutions, particularly those of the developed markets, have continued to report large losses, arising directly or indirectly from their past involvement in the manufacture, distribution, trading and holding of toxic financial assets.
The size of these losses, revealed in major financial institutions' fourth-quarter numbers, is beyond market expectations. This is leading to renewed concern about the severity of the crisis, at a time when many have been hoping to see improvements, after governments have implemented unprecedentedly large rescue packages, he said.
"The latest situation in the developed markets calls for even larger rescue packages for their financial systems," he said. " Worse still, there has been little sign the functioning of these systems is returning to normal."
He said the important role of financial intermediation in supporting the economy continues to require the central banks' presence in various capacities, notably as guarantors of the banking system assets and as providers of capital and liquidity.
Credit tightness in the developed markets and the sharp economic downturn are reinforcing each other, threatening to create further financial turmoil, perhaps involving large credit losses at the banks, as borrowers face difficulties and find themselves unable to service their debt, Yam says.
He also says the second wave might be more contagious for emerging markets, as the financial crisis has sent many of them into recession.
"Promoting general awareness of risks is an effective way of limiting their adverse impact in the event that they materialize," he says.