Briefing: Integrating ASEAN's Financial Markets

by Sibos Issues, 01 October 2009

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topics:
Finance and Banking

tags:
ASEAN Board Asian Bond Markets Initiative financial markets Markets in Financial Instruments Directive Single Euro Payments Area

Europe has made great strides in harmonising its financial markets with initiatives such as the Single Euro Payments Area (SEPA) and the Markets in Financial Instruments Directive. The Association of Southeast Asian Nations (ASEAN) also plans to establish more coordinated financial markets.

But with no supranational body like the European Commission to drive such initiatives, the primary task is to maintain the necessary political will across the ASEAN countries – Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam – while also leveraging continued support from Asian regional heavyweights China, Japan

and South Korea.

“The fact that there is no single currency, central bank or harmonised regulatory framework for Asia will not be easily overcome,” notes Philippe Metoudi, member of the executive board, head of relationship management, Asia-Pacific/Middle East/Africa, Clearstream. “Building a common infrastructure in Europe has been an ongoing process for more than 50 years.”

The benefits of harmonised infrastructure are clear. The Asian Bond Markets Initiative (ABMI) is expected to provide a level of liquidity that will convince Asia’s corporate issuers to raise more capital from within the region, while a common equity platform – the ASEAN Board – has been devised to increase the competitiveness of ASEAN members’ equity markets with the aim of attracting more international investors.

Lessons learned

Although the ASEAN nations face markedly different challenges to Europe, lessons can still be learned from the Western experience.

“ASEAN countries will not have to reinvent the wheel to move forward with their plans,” comments Alec Nacamuli, global payments executive, financial services sector, IBM. “It is entirely possible to adopt the SEPA schemes and standards to conduct payments across the region. Even though there is no single currency in Asia, it is still possible to harmonise in areas such as market rules, practices, schemes and standards.”

Trying to thrash out the rules for ASEAN integration will be where bodies like SWIFT will be crucial, particularly in areas such as standards and best practice.

The difficulties of standardising financial technologies and infrastructures across the region are expected to be a big talking point. Although the ASEAN countries will embark on the route to closer integration from diverse starting points, the drive toward single market initiatives could enable many to comply with international standards.

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