Global challenges concern Asian banks
Major challenges facing the global economy and key issues of financial regulatory reform were at center stage at the Institute of International Finance (IIF)'s Annual Meeting of Chief Executive Officers of financial institutions active in Asia.
At the 3-day meeting in Bangkok which was wrapped up on Thursday, the IIF Deputy Managing Director and Counsellor Hung Tran said that the gathering was at a time of concern about global output and employment growth, as global economic prospects have regrettably deteriorated. He said that world growth is expected to slow this year, including in Asia. Many Asian and other emerging markets, while still experiencing solid growth, have been affected by the debt crisis in Europe and the increasing deleveraging by banks, which have eased global export demand and reduced European bank exposure to Asia.
"A strengthened framework for international policy coordination among the G-20 countries is much needed--emphasising increased accountability and deeper commitment from key economies, as well as a fuller and more active participation of leading emerging markets, including from Asia--aimed inter alia at correcting both global and regional imbalances between surplus and deficit countries. A successful strategy should focus on addressing strains in the Euro Area and fiscal imbalances in mature countries in general, and on balancing the often competing objectives of regulatory reforms for financial stability and sustaining credit growth in the current environment,” he said.
The IIF is the global association of leading financial services firms, with more than 450 member institutions headquartered in over 70 countries.
The conference included special sessions on the regional economic outlook and policy challenges, the development and integration of Asian financial markets and on the opportunities and key issues of banking in Asia, chaired by Dato` Sri Nazir Razak, Group Chief Executive, CIMB Group; Krirk Vanikkul, Deputy Governor, Bank of Thailand; and Dato` Sri Omar Abdul Wahid, President and Chief Executive Officer, Malayan Banking Berhad. Participants pointed to the significant potential for enhancing further financial intermediation in Asia and the development of regional capital markets. Banking plays a central role in supporting economic growth in Asian countries—intermediating savings, providing credit to consumers and companies, financing trade and infrastructure projects, and extending access to financial services to a growing segment of their expanding populations. Participants felt that there remains a need for stronger development of capital markets. They welcomed, therefore, the progress made in recent years in advancing initiatives such as the Asian Bond Market, the Regional Professional Securities Market, the Asian Funds Passport and the Asian Banking Framework. They also emphasised the gains from a further intensification of these efforts for market efficiency and business opportunities for banks and other financial institutions.
The conference concluded with a roundtable discussion of the impact of new global financial regulatory reforms on the Asia region, chaired by Chartsiri Sophonpanich, president of Bangkok Bank which sponsored the meeting.
Participants welcomed the progress made in advancing the core global regulatory reforms for increasing the quality and quantity of bank capital, macroprudential oversight, supervision and resolution. They nonetheless underscored the importance of rebalancing the regulatory reform program to promote financial stability and efficiency while also allowing the financial sector to support global growth. In this context, they pointed to the risks posed by excessive capital surcharges, fragmentation, and inappropriate liquidity requirements for encouraging deleveraging and limiting the potential credit expansion by banks and thus their contribution to output and employment growth. While financial institutions in Asia are well placed and resilient, excessive regulatory requirements pose risks for the financial sector and economic activity in Asian countries as well. Participants welcomed the more effective Asian voice in regional and international fora and the special attention paid by the IIF to Asian financial institutions.
