Let me demonstrate by using an iceberg to paint a clearer picture. The tip of an iceberg above the water is what we observe through banking performance, financial information, and investment portfolios. Although the tip may show good performance records, the larger portion of the iceberg under water is what determines its strength or fragility. Unawareness of small cracks in the iceberg could result in its unforeseeable disintegration. Corporate culture and behaviour is a part of this portion under water and is an influencer of decisions within the organization. Building corporate culture and behaviour that fosters good governance, soundness, and sustainability therefore has to be instilled into the organization. For ASEAN banks, we have learnt our lesson from the Asian Financial Crisis and bankers who had endured through that period are fully aware of the associated risks and their consequences. Going forward, however, with new and younger generations of bankers, these lessons may not be as fully appreciated. Newer generations may be less aware of the costs associated with excessive risk-taking behaviours and the aggressive search for higher yields may be prevalent. In this transitional period, it is therefore even more imperative that the proper culture and behaviour be embedded into every level of the organization, starting from the highest level at the board and cascading down to every level of management and staff. Fourthly, financial institutions need to embrace sustainable banking to ensure sustainable success. The concept of sustainability plays an increasingly important role in our global and regional development.

The widening wealth gap, coupled with lower yields on savings has led to the feeling of less hope of a better future. Amidst this frustration with the status quo, sentiments of anti-present economic establishment such as anti-globalisation, antitrade, and even anti-bankers have become more widespread. We see increases in non-tariff trade barriers and oppositions to trade deals, polarization of views among people, Brexit, and the US Election. Populist and nationalist policies are flourishing among middle and lower income people in many countries. Against this backdrop, we also face fast changes in technology. Not since the industrial age, have we witnessed such rapid adoption of technology and innovation, thanks in part to the digital revolution. Although technology increases economic productivity and improves people’s standard of living, it can be a source of stress for the working-age population. Many, even the highly skilled, such as investment professionals, fear being replaced by robots and artificial intelligence. Current business models are rapidly rendered obsolete by new business models and the sharing economy such as Uber or Airbnb. Owing to changing economic environment, social sentiment, and technological advancement, I see five imperatives for ASEAN’s banking sector going forward. First, innovative technology is fast changing financial business landscape and we have to be proactive in embracing technology. Given the low-growth and low-interest rate environment, banks’ income is facing pressure from declining spread and fees. Consumers’ needs and behaviour have changed and they now demand faster and more convenient services.