Interestingly, the authors estimated that using digital finance to enhance financial inclusion would boost GDP by between 9-14% in large economies such as Indonesia and the Philippines, and up to as much as 32% in Cambodia. 3/5  BIS central bankers' speeches  Global banks will continue to play an important role in the region, especially in wholesale banking and the intermediation of US Dollar flows. But the onus largely falls on Asian banks to expand financial inclusion, especially at the retail and small business level. Using innovative FinTech solutions, they can mobilise untapped savings and provide access to credit for under-banked individuals and businesses. Asia is fertile ground for digital innovation in banking. In Indonesia and Vietnam, only around a third of the population is formally banked. Yet, their mobile phone penetration rates are above 100% – that’s more than one phone per person on average! Coupled with a young and tech-savvy population, what we have is a ripe environment for mobile banking. And we are seeing interesting innovations across Asia, bringing banking services to the broader population. In Indonesia, the Financial Services Authority (OJK) runs a branchless banking programme with participant banks. Called Laku Pandai, or “smart man”, the programme offers banking and financial services to the under-banked, supported by mobile phones and IT facilities. DBS Bank is collaborating with peer-to-peer (p2p) lending platforms to cross-refer clients. DBS will refer to the p2p lenders some of the smaller businesses that it is unable to lend to.

This increase comes on the back of a decline in lending by Euro-area banks – over the same period, their share decreased from around a third to less than 15% as they pulled back from the region. Second, Asian banks have been acquiring the Asian business lines from global banks, especially in wealth management. In 2013, Sumitomo Mitsui Banking Corporation bought over SocGen’s Japanese private banking arm. And just late last year, OCBC Bank acquired Barclays’ wealth and investment management business in Singapore and Hong Kong. Even as Asian banks push for growth, they continue to maintain high prudential standards. The average Tier 1 capital ratio of Asian banks was 13.4% as of last year, up from 10.6% in 2008 and comfortably above the Basel minimum requirement of 6%. Key Asian jurisdictions who are members of the Financial Stability Board – including China, Japan, Indonesia, Korea, Hong Kong and Singapore – have been assessed to be compliant or largely compliant with the Basel Committee’s capital and liquidity standards. Several other Asian countries – Malaysia, Philippines and Thailand – have also implemented the Basel III rules. Asian banks are dealing with cyclical headwinds The major Asian banks’ sound prudential standards position them well to face the challenges in the current environment – ranging from geopolitical risks to heightened policy uncertainty in the advanced economies. The post-crisis operating environment has been difficult for banks around the world. European bank profitability remains depressed seven years after the global financial crisis, with return on equity or RoE averaging below 3%.