ASEAN banks on long road to financial integration: S&P

SINGAPORE - Financial integration within ASEAN is progressing, but the process won't be entirely smooth, according to ratings agency Standard & Poor's, which believes full integration could spur the emergence of major banks that can compete with large banks outside the region.

“Better economies of scale would also make financial systems within the region more efficient,” S&P says. Along with the improvement of financial infrastructure in each country, the agency believes integration will make the banking sectors more resilient to external shocks.

"We don't expect the integration to be entirely smooth because, as countries liberalise their banking industries, competition will intensify -trends that not all local players welcome," said S&P credit analyst, Chris
Lee.

"Integration will also increase the risk of contagion and spillover effects within the region,” he said. “The varying pace of liberalisation and divergent regulatory frameworks among ASEAN countries also complicates the industry's consolidation." www.stgandardandpoors.com (ATI).