CCP default management can and should be enhanced Before concluding, let me say a quick word on today’s third topic, the complex challenges CCPs face in managing defaults.10 CPMI-IOSCO is currently working on default management auctions, which is very welcome as this area of CCP risk management could benefit from further convergence towards shared best practices.11 The recent default at Nasdaq Clearing has certainly focused the minds of policymakers on this issue. There is much ground to cover for CCPs to converge towards best practices, from setting the right incentives for auction participants to properly calibrating their financial resources to cover concentrated positions in thin or illiquid markets. I am sure this workstream will yield valuable conclusions for both regulators and the industry. Conclusion In sum, today’s conference shows that we are continuing to ensure that CCPs steadily become more resilient and sophisticated in their role as systemic risk managers and so can truly manage any situation. At times, this requires imagination to understand the interaction of participant behaviours, complex portfolios and stress scenarios, which is a prerequisite for setting the right incentives. It also requires humility to understand the limitations of this exercise and the need for fall-back plans. Extreme and unexpected events do happen and the very purpose of CCPs is to act as a circuit-breaker during crises. For CCPs to perform this role as adequately as possible, all relevant authorities, including central banks, need to pull on the same rope.

Best practices and innovative products from one part of the region can also be deployed to other parts of the region, to tackle a common need or challenge. An area that has considerable potential, both to support, not only greater regional financial integration but also for the development of national financial systems, is the establishment of credit reporting infrastructure. For example, the implementation of the Central Credit Reporting Information System in Malaysia, one of the most comprehensive in the world, has had a profound impact in transforming the credit landscape in Malaysia by improving efficiency and productivity, enhancing access to financing, strengthening risk management and encouraging responsible borrowing. These benefits can be extended more broadly by establishing and linking up similar systems across the region through collaborative efforts. The potential also exists for similar infrastructure to be developed in the insurance sector which can serve to strengthen underwriting assessments, and allow loss data such as for catastrophes to be shared more efficiently. Importantly, developments in this area will greatly advance financial inclusion and contribute towards narrowing the development gap among and within ASEAN economies. Key achievements in financial integration Let me now turn to where we are in the financial integration process. Consistent with a flexible and pragmatic approach which has been adopted for ASEAN, implementing the integration process within ASEAN is grounded on the state of readiness of each member country. Member countries are given flexibility to ensure that the integration process is sustainable and meet national policy objectives.