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ASEAN banking integration: Killing two birds
Financial integration, therefore, should not be the sole policy issue in the minds of ASEAN financial regulators.
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A cashier counts rupiah at an office in Jakarta. (The Jakarta Post/Nurhayati)
A
s ASEAN’s largest economy, Indonesia has been leading efforts to integrate the region’s banking sector. Indonesia, along with Malaysia, signed the first bilateral agreement under the ASEAN Banking Integration Framework (ABIF) in 2016.
Since its endorsement by the ASEAN central bank governors in 2011, the ABIF has been a cornerstone of ASEAN’s pursuit of greater financial integration. Financial integration is embedded in the ASEAN Economic Community (AEC) 2025 Blueprint as one of the three strategic objectives of the finance sector, along with financial inclusion and financial stability.
Banks designated as Qualified ASEAN Banks (QABs) will anchor the ABIF and are expected to be the backbone in facilitating intra-ASEAN trade and investment by 2020. These banks are blessed with benefits such as greater market access to branch networks and greater operational flexibility, and are entitled to treatment similar to local banks.
These benefits have fueled the interest of ASEAN member states to seek reciprocal agreements with one another to negotiate the entry of QABs into each other’s market.
