Regional integration: the ASEAN model We stand today on the brink of very exciting times for ASEAN as we draw closer to the vision of an ASEAN economic community in 2015. If the AEC vision was aspirational when it was first conceived, it is now clearly an imperative. This has prompted an increased momentum in efforts to realise an integrated ASEAN economic community, notably by achieving increased financial integration, higher levels of intra-regional trade and greater two-way cross-border investment flows. Like most regional blocs, the integration process for ASEAN seeks to promote greater regional connectivity which will in turn expand and reinforce the region’s growth potential. The region’s integration process however, has followed its own path. Given the diverse nature of our economies within ASEAN, the integration model adopted for ASEAN has been one that focuses on (i) strengthening preconditions through collective capacity building to promote more open market access among the economies in ASEAN; (ii) progressively reducing barriers to facilitate cross-border trade; (iii) developing the market infrastructure and enabling environment to promote efficient and effective intermediation of cross-border financial flows; and (iv) establishing the appropriate safeguards for financial system stability. Progressive financial integration through this ASEAN model has been a strategy that has augured well for the region, allowing for the greater integration at a pace that is based on readiness and strength of the financial sector. Since 2007, ASEAN has achieved considerable progress in its efforts to deepen financial integration.

Fourthly, is reinforcing buffers to withstand future shocks. This is a key area of the international reform package that aims to significantly raise the resilience of the international financial system and to promote sound risk-taking activities. The standards will see financial institutions holding larger amounts of capital, including buffers which can be drawn down as losses occur. At the same time, the standards will also require banking institutions to significantly strengthen their liquidity and funding positions. Collectively, these standards aim to strengthen the banking institutions’ ability to continue to support orderly credit intermediation, particularly during periods of instability. While carrying more equity entails greater costs of capital for banks especially in the short-term, this investment will support a more stable financial system and overall global economy as well as build the confidence of consumers and investors, particularly during periods of stress. In view of these imperatives, this is a timely juncture for the industry to reflect and take charge of the efforts to rebuild and strengthen the foundations for more sustainable finance. Critical to this is the realisation that the creation of long-term shareholder value is consistent with, and not at odds with prudent risk taking and responsible business practices. Indeed, financial institutions with a regional footprint in ASEAN have the potential to contribute to the development of the financial systems in countries where they operate. There will be tremendous payoffs to be reaped from pursuing such sustainable strategies.