Challenges for financial markets Speech given by Jon Cunliffe, Deputy Governor Financial Stability, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Authority Board  Association for Financial Markets in Europe Annual dinner, London Thursday 3 November 2016  1  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  I am very pleased to have the opportunity to speak tonight at the annual dinner of the Association for Financial Markets in Europe (AFME). The Bank of England has throughout its history had a close association with financial markets and with the institutions that support them. Indeed, the Bank was instrumental in the creation in 1914 of one of AFME’s distant ancestors – the quaintly named Accepting Houses Committee. The outbreak of the First World War and consequent disruption of international payments threatened to bring down the London markets and the international merchant banks that supported them. The Bank enabled a moratorium on war disrupted payments and offered to purchase the war disrupted bills. One contemporary historian of the City hailed this as “the greatest evidence of London’s strength as a financial centre that could have been desired or dreamt of”. 1  Over the following century, the Accepting Houses Committee became the forum of the City’s most influential merchant banks; its members enjoyed the implicit backing of the Bank of England. The Committee eventually became part of the London Investment Banking Association which merged with the European part of SIFMA to create AFME in 2009.

Costs of cross-border financial transactions remain high, and there is limited usage of regional currencies for cross border transactions. There is also limited presence and penetration of regional banks in each country. In this regard, I see many opportunities for Asian banks to play increasing roles in connecting businesses within our region. Enhanced regional financial connectivity will not only support trade and investment activities, but can also promote productivity, immunity, and financial inclusivity in Asia. I therefore welcome and fully support AFCA in its endeavor to promote greater financial cooperation. This forum will help ensure that our region can reap the full benefits of increased financial connectivity. Greater regional economic integration can then reach its full potential and harness the dynamism of this region for sustained shared benefits. Currently, the Bank of Thailand has placed much emphasis on strengthening financial connectivity within the region, particularly with ASEAN-5 and our neighbouring CLMV. Let me highlight our two projects that have strong potential to connect people and businesses in the region more efficiently by providing better access, wider choices, and lower costs of financial services.     First, ASEAN central banks are working towards achieving the goals of the ASEAN Banking Integration Framework. For example, the opening of Qualified ASEAN Banks or QABs would establish important cross-border banking networks, which will help increase efficiency of financial services across the region. At present, the Bank of Thailand is in the process of negotiating QAB agreements with the authorities of Malaysia, Myanmar, Indonesia, and the Philippines.