ASEAN accelerates regional banking integration

KUALA LUMPUR - Southeast Asian banks will be able to operate more freely across the region due to a landmark agreement on banking integration. The move will pave the way for greater access to loan facilities across ASEAN's 10 member states and promote stable liquidity within the region's banking system, thus keeping out volatile inflows of "hot money" from developed markets.

Association of Southeast Asian Nations finance ministers signed a banking integration framework in Kuala Lumpur on March 21, aimed at accelerating greater regional mobility of the banking sector and boosting cross-border trade and investment. The agreement comes ahead of the Dec. 31 launch of the ASEAN Economic Community, a broad framework intended to foster closer economic co-operation and greater ties between the people of the region.

The ASEAN Banking Integration Framework, or ABIF, is "anchored in principles that emphasise inclusiveness, transparency and reciprocity," the ministers said in a joint statement after their meeting, which was held together with the governors from the region's central banks, included in the summit for the first time.

Under the framework, any two ASEAN countries will be able to enter into reciprocal bilateral arrangements to allow qualified banks from their countries to operate in the markets of both signatories. To qualify, a bank will have to meet criteria mutually agreed on by the respective central banks in order to gain "Qualified ASEAN Bank" (QAB) status.

Currently, most ASEAN member countries strictly limit the operations of foreign banks, including the number of branch licenses, financial products offered and joint ventures.

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