A bank intending to serve such conglomerates should have an integrated system across countries and advisory services for alternative funding such as from the capital market. These require more investment in IT and people. On connectedness, financial integration has a key role in supporting business opportunities in ASEAN. If you compare the pace of financial integration to economic integration, there is still a lot of catching up. For example in Thailand, foreign assets in the banking system account for about 10 percent of total assets, still well below intra-ASEAN trade at 24 percent and investment at 17 percent. Currently, financial institutions are already on the journey toward financial integration through outward presence, as well as strategic partnerships and alliances. This will be further enhanced with Qualified ASEAN Banks (QABs) and greater cohesiveness and transparency of regulation in ASEAN. To underpin ASEAN’s promising future and growth potential, infrastructures necessary to facilitate financial integration is also important. Further linkages of financial infrastructures should be encouraged and promote usage of already integrated systems, such as the regional payment systems. I must admit that the regulatory landscape for banking in ASEAN countries are quite diverse and include many legacy regulations which impede integration. This makes financial integration more difficult to achieve. This is one area that ASEAN as a group has recognized and will tackle under its financial integration plan Post-2015 to accommodate AEC 2025 agenda. BIS central bankers’ speeches  3  Finally, on sustainability, a banking system that is competitive, inclusive, and connected needs to also be sustainable.

Realization of these commitments requires long-term funding at reasonable cost from the financial sector. Therefore, the roles of the financial sector should be highlighted. The ambition can be likened to the destination of our journey. What is our destination? It is to have a banking system that is responsive to changes in the real economy and able to meet its ever-changing needs. With this destination in mind, milestones are set at different stages with signposts to prevent us from getting lost or sidetracked along the way. For the banking system, these milestones and signposts are laid out in the Financial Sector Master Plans. We have come a long way since the 1997 financial crisis and have put in place foundations which shaped the country’s core financial system. In our first milestone of structural improvements, the number of financial institutions was consolidated from above 100 to about 30 today. International standards and best practices on risk management were adopted, built upon necessary infrastructures including the core payment system, the Deposit Insurance Scheme and National Credit Bureau. With our second milestone to enhance efficiency, new qualified foreign entries with sufficient capitals and well-designed business model brought meaningful competition. With these reforms, the banking system has become more robust and competitive with good risk management and governance, sufficiently capitalized according to Basel III and show notable growth. Nonetheless, I believe that efficiency can be further enhanced through improvement in IT systems, data development, and utility sharing.