Financial integration is a strong complement to trade integration and a critical component of the overall AEC project. Deeper financial integration will yield substantial benefits for ASEAN economies. •  It will support economic growth by helping to mobilise surplus savings more efficiently and channelling them to productive investment opportunities in the region. •  It will strengthen resilience to external shocks by helping to deepen and broaden capital markets. •  It will promote financial inclusion by helping to expand the reach of financial services to a wider community that is currently under-banked and under-insured. The ASEAN Financial Integration Framework (AFIF), adopted by ASEAN Central Bank Governors and endorsed by ASEAN Finance Ministers in 2011, envisages a more integrated financial region by 2020. AFIF sets out the following key thrusts: •  remove restrictions to the intra-ASEAN provision of financial services by ASEAN financial institutions;  •  build capacity and infrastructure to develop and integrate the ASEAN capital markets  2  BIS central bankers’ speeches  •  liberalise the flow of capital across the ASEAN region  •  harmonise payments and settlements systems  •  strengthen capacity building, regional financing arrangements, and regional surveillance  The pace of financial integration has, however, lagged behind trade integration. In part, this is deliberate. In part, this is disappointing. The slower pace is deliberate in the sense that financial integration is more complex than trade integration and requires more time.
•  We should harness technology to support the pooling of data in regional and global data centres. •  Data aggregation will help enhance consolidated risk management and ensure better protection of customer data. Insurance integration In insurance, ASEAN member states have agreed on an ASEAN Insurance Integration Framework. •  ASEAN members have agreed in-principle to liberalise the cross-border supply of Marine, Aviation and Goods in International Transit (MAT) insurance in the seventh package of financial sector commitments of the AFAS. •  When this agreement is signed and ratified in 2016, insurance companies will be able to offer MAT insurance across ASEAN’s borders. •  This move will help to lower the cost of insuring cross-border business risks and help to spur intra-ASEAN trade. The next key steps will be to liberalise the catastrophe insurance and reinsurance markets. •  ASEAN’s insurance penetration rate is barely half the global average, even as the incidence and severity of natural catastrophes in ASEAN continue to increase. •  This large and widening gap in insurance coverage leaves ASEAN countries vulnerable to economic loss and production disruptions from natural catastrophes. •  As risk exposures grow in scale, size and complexity, they will exceed the capacity of individual states to underwrite the risks confronting their communities and economies. Liberalising ASEAN’s insurance markets will reduce the cost of insurance protection to governments, to businesses as well as to consumers.