Keywords: ASEAN, ADB, banks, single banking space, integration, financial liberalization

Integration in the banking sector is an important component in the process of building the ASEAN Community in 2015*, primarily because most of the countries in the region today represent models of economic development driven by the banking sector.

The size of bank assets significantly exceeds the size of stock markets, and bank lending is the main source of borrowing by national enterprises. Accordingly, increasing capital mobility and lowering interest rates, which are intended to be the result of deepening integration processes in the ASEAN banking space, can provide much greater growth for national economies than other joint projects (in particular, the successfully implemented Initiative for the Development of Bond Markets in ASEAN countries).

CENTRIFUGAL TRENDS

In November 2012, Malaysia hosted the 19th ASEAN Banking Conference and the 42nd meeting of representatives of the ASEAN Banking Councils. The parties discussed the prospects of forming a single banking space. In April 2013, the 9th ASEAN Central Bank Governors ' Meeting was held in Brunei, resulting in the ASEAN-ADB (Asian Development Bank)report The Road to ASEAN Financial Integration, published with the aim of accelerating reforms in the banking sector of the region's countries. This report, which is perceived by many as a significant step towards creating an integrated banking space in the region, identified both the key problems that hinder the development of integration processes and the necessary steps that should be taken towards liberalizing and deepening integration processes in the region.

During the meetings, representatives of the ASEAN countries repeatedly stressed the need and readiness to develop an action plan for the formation of a single banking space in ASEAN (ASEAN Banking Framework). The issue of preparing such a document has been raised periodically during multilateral meetings at the regional level over the past few years. However, significant contradictions that persist within the ASEAN countries and are primarily aimed at protecting national markets from external threats have so far prevented the initiative from being translated into practice.

The ADB report emphasizes that, first, even by 2020, the ASEAN countries will be able to form at best only a partially integrated banking services market, and second, integration initiatives will be implemented in two stages (the five most developed ASEAN countries will be involved first, and then the rest of the member states).members of the Association). Accordingly, the greatest progress can be achieved by the top five countries - Singapore, Malaysia, Indonesia, the Philippines and Thailand.

The deepening of integration processes in the banking sector is hindered by a number of negative factors related to the uneven economic development of ASEAN countries and differences in the size and efficiency of banking sectors.

Factor 1. Differences in the size of ASEAN banks. The top three banks in terms of banking assets include Singapore (the largest banks include Development Bank of Singapore (DBS), Oversea-Chinese Banking Corporation (OCBC), United Overseas Bank (UOB), Malaysia (Maybank, CIMB Bank, Public Bank) and Thailand (Bangkok Bank, Krung Thai Bank, Siam Commercial Bank). For Singapore and Malaysia, the average value of the bank's assets is more than $14 billion, for Thailand-about $10 billion, while for other ASEAN countries this figure is lower than $3 billion.¹

* In April 2013, the leaders of the ASEAN member states began discussing programs to transform the organization into an economic community similar to the European Union by the end of 2015 (Editor's note).

Table 1

Credit ratings of East Asian countries according to leading international rating agencies

Compiled by the author on the basis of data from Trading Economics. Credit Rating Database, June 2013.

Factor 2. Differences in the level of reliability and growth rates. According to GlobalFinance, Singapore's banks are not only the largest, but also the most reliable among the ASEAN countries. However, while Singapore and its national banks have held the leading positions in terms of reliability indicators for quite a long time, the Philippines has taken the leading position in the rating of the most rapidly progressing in terms of improving reliability indicators and expected improvement in business conditions. According to research conducted by Standard and Poor's and British banking giant Stand and Chartered Bank, in 2013 74% of investors expected the reliability of national institutions to increase and forecast an improvement in the business environment in the Philippines. At the same time, the corresponding figure for Indonesia was 46%, Thailand and Singapore-44%, and Malaysia-41%, respectively ². In addition, the ASEAN member countries themselves have different credit ratings (see Table 1).

Factor 3. Differences in interest rate levels (see Table). 2) and the nature of regulation of national banking sectors.

Singapore, Malaysia and Thailand remain the most competitive in the regional market in terms of interest rates and credit rating.

Today, there are large differences in the degree of openness of the ASEAN economies to foreign capital inflows, as evidenced by a number of indicators. If for Ma-

Table 2

East Asian interest rate levels, %

Compiled by the author based on data from Trading Economics...

Table 3

Forms of carrying out commercial activities of the largest ASEAN banks in the territory of the Association's partner countries

Источник: Kaveevivitchai N. Maybank steadily building pan-ASEAN business // Bangkok Post, 21.01.2013.

While the share of foreign banks is approximately 18%³, with 8.5% owned by ASEAN member countries ⁴, for the Philippines and Thailand, the latter figure was 0.4% and 3.7%, respectively.

Another difficulty, which is a natural result of these problems, is the relative closeness of the system of circulation of bank capital flows. Larger and more reliable banks prefer to direct financial flows to equally reliable banks in the ASEAN partner countries.

BOTTOM-UP INTEGRATION VS. TOP-DOWN INTEGRATION

Despite the presence of a number of centrifugal factors that hinder the expansion of integration processes in the region, the high growth rates of Asian economies push the largest ASEAN banks to expand their presence in partner countries, although they do so with great caution. On January 21, 2013, the Bangkok Post published a study showing the nature of the presence of the 12 largest ASEAN banks in the Association's partner countries (see Table 3). The subjects of interbank transactions are mainly financial institutions of the five leading ASEAN countries. Among the banks with the largest share of regional presence are Malaysia's Maybank, Bangkok Bank in Thailand and Singapore's United Overseas Bank, i.e. the most open and focused on the Asian region are also banks in Malaysia, Singapore and Thailand. In particular, for the Malaysian Maybank, which in November 2012 started its operations in Laos and became the largest bank in the world.

The only bank with a commercial presence in all ASEAN countries, the Association's countries are a priority in the development strategy for the coming years. According to the Chairman of the Board of the bank, Abdul Wahid bin Omar, by 2015 the bank's board plans to increase its pre-tax profit from 36% to 40% precisely by expanding its activities in the ASEAN ⁵ member countries.

If three levels of development of integration trends in the banking sector are distinguished: banking/corporate, state and interstate, then the ASEAN countries are characterized by activation at the first level, gradual development towards the formation of an integrated banking space at the third, with relatively little progress, and in some cases counteraction, at the second.

Integration processes, especially in the five most developed ASEAN countries, are quite actively fueled by the policies of large banks that seek to expand their presence in regional markets, as well as corporations that are actively looking for access to additional sources of financing (so-called "bottom-up"integration). In addition, the need to liberalize the banking sectors of Asian countries in order to increase transparency and stimulate economic growth is actively discussed at the interstate regional level within the framework of integration associations and forums. However, meetings at the regional level are purely for discussion, forums serve only as a platform for discussion and exchange of experience, and reports and initiatives published by regional organizations, in particular, the ADB, are only advisory in nature.

However, at the national level, the monetary authorities of individual states are no less active in taking steps to block the penetration of foreign banks into national markets and protect national banking sectors. As an example, we can cite the position of the monetary authorities of Indonesia regarding the acquisition by Singapore's DBS Group of more than 67% of the shares of Indonesian Bank Danamon. DBS Group's offer to acquire 67.37% of Bank Danamon in April 2012 was rejected by the Central Bank of Indonesia, limiting the possible value of the transaction to 40%^.6

The Central Bank of Vietnam also periodically puts forward initiatives to reduce banking risks and increase the stability of the banking system. In particular, at the end of 2012, the project of doubling the minimum capital requirements was actively promoted, which, however, would significantly limit the possibilities of expanding banking operations and generating additional profits.

Hans Sikat, President of the Philippine Stock Exchange, expressed his doubts about the expediency of developing regional integration processes in the financial sector, in particular, banking, during a discussion at the ASEAN Economic Integration Forum in August 2013. In his opinion, the risks that liberalization in the financial sector undoubtedly entails exceed the possible positive effects.

For many years, when discussing initiatives to expand banking integration, the ASEAN countries have been trying to protect their banks from the risks of accumulating "bad debts" as much as possible, while facilitating the access of partner banks to national financial resources.

To this end, the monetary policy authorities of the ASEAN member countries have developed the concept of qualified ASEAN banks, i.e. "ASEAN banks that meet the necessary requirements". It is assumed that only banks that have received such a status will have easier access to financial resources, which should be a consequence of the formation of an integrated banking space. However, the problem today is that Member States have not yet been able to develop a clear list of criteria for assessing the" quality " of banks. However, in 2013, member countries managed to make significant progress in this direction: the Road to ASEAN Financial Integration report contains a list of requirements that are planned to be taken into account when assigning the appropriate status to ASEAN banks, in particular^::

- capital adequacy requirements;

- consolidation requirements and definition of a consolidated supervisory authority;

- restrictions on the total amount of credit claims;

- requirements for reporting and transparency of information.

However, targets and procedures for assigning "compliant" status to ASEAN banks have not yet been developed, although they are expected to be based on the Basel III*standards.

PLUS JAPAN

At the region-wide level, ASEAN-wide member countries have made little progress in liberalizing their national banking systems and expanding financial integration. Much greater results have been achieved by individual States in the region at the bilateral level, and not so much between individual ASEAN States, but within the ASEAN + 1 association with the participation of Japan.

* Basel III-a document of the Basel Committee on Banking Supervision containing methodological recommendations in the field of banking regulation. Basel III strengthens the bank's capital requirements and introduces new regulatory requirements for liquidity.

Fig. Sequence of expansion of integration processes in the banking sector.

In recent years, Japanese companies have been actively expanding their presence in the region. In turn, the ASEAN countries, which are the main markets that Japanese companies seek to enter, are interested in attracting Japanese investment, expecting that they will become one of the main engines of economic growth. As a result, there is an expansion of cooperation at the interbank level. In particular, in March 2013, Indonesia's largest bank Bancode Oro Unibank signed a cooperation agreement with a number of Japanese banking institutions (Hokuto Bank, Shonai Bank, Joyo Bank, Chiba Kogyo Bank, Juroku Bank, Awa Bank, Daisan Bank) to provide financial support to medium-sized Japanese enterprises operating in Indonesia.⁸

In July 2013, the Central Bank of Japan announced that it had entered into an agreement with the monetary policy authorities of Singapore to open a credit line to Japanese companies operating in Singapore secured by Japanese government bonds.⁹ This measure is also aimed, on the one hand, at providing Japanese corporations with financial resources in the event of a lack of liquidity, and on the other hand, at expanding foreign direct investment by Japanese companies and banks in the Singapore economy. A similar scheme for Japanese companies was also implemented in Thailand in 2011.

* * *

Thus, today it is premature to talk about the development of full-fledged integration processes in the banking sector in the region, accompanied by political will "from above". We can only talk about expanding integration trends and creating prerequisites for future integration "from below".

Despite the obvious interest of some countries and banks in expanding integration initiatives, this development will be most beneficial for the largest and most reliable banks, which will lead to further consolidation of leading banks with a lack of funding for small financial institutions, an increase in the gap in the level of development of the banking sectors of ASEAN countries, and an increase in obstacles to spaces within the entire Association.

In the coming years, de jure ASEAN countries will strive to create a single banking space within ASEAN, but de facto the greatest results in this direction will be achieved in the format of the five most developed ASEAN countries and Japan (ACE-AN-5+1). At the same time, at the first stage, the greatest progress will be achieved within the Singapore-Malaysia-Thailand triangle, followed by increased involvement in the integration processes of Indonesia and the Philippines, while simultaneously strengthening and deepening relations with Japanese corporations and financial institutions (see Figure).

If we analyze the degree of financial interdependence of the economies of East Asian countries as a whole, it becomes obvious that Japan is the main driving force behind the expansion of integration trends "from below". This country is actively expanding its presence in the region, and its companies are not only expanding investment in the economies of neighboring countries, but also gaining access to their credit resources.

Today, there are two major financial centers in East Asia that can act as locomotives of financial, including banking, integration in the region-Japan and Singapore. Both countries are actively increasing their presence in other countries of the region, while simultaneously expanding bilateral cooperation, forming a regional financial axis "Japan-Singapore", around which regional integration processes will revolve in the future.

¹ Report: Pace of ASEAN banking integration slow // Business Times, 4.04.13.

² Philippine led ASEAN with 74% Investor's confidence // Frontrunner Foreign Investments - http://visminforum.blogs-pot.ru/2013/04

³ The Road to ASEAN Financial Integration // ADB, Manila, April 2013, p. 8.

⁴ Report: Pace of ASEAN...

⁵ Ibidem.

^{Grand J., Hidayat T.} 6 Indonesia approves DBS acquisition of 40% of Bank Danamon // Financial Times, 21.05.2013.

⁷ The Road to ASEAN.., p. 11.

^{Dumlao D.C.} 8 BDO teams up with Japanese banks - http://business.inquirer.net/ 136951 /bdo-teams-up-with-japanese-banks

⁹ Establishment of an Arrangement for the Provision of Singapore Dollar Liquidity against Japanese Government Securities as Collateral. Bank of Japan. Monetary Authority of Singapore. 26.07.2013 / / website of the Central Bank of Japan - http://www.boj.or.jp/en/ announcements/release_2013/rel 130726b. pdf

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