It is steadily making progress in individual asset classes, among small groups of countries, sometimes bilaterally, where there is common interest and where markets and institutions are at similar stages of development. 12. We can see evidence of market integration among jurisdictions in several areas:  a. Banking. ASEAN is in discussions to complete a banking integration framework that will allow qualified ASEAN banks to progressively expand in each other’s’ jurisdictions. This initiative aims to create opportunities to strengthen regional banks in ASEAN and improve banking services offered to local markets. Even in other Asian countries where cross-border bank financing is restricted, we are seeing pockets opening up. For example, since China issued cross-border RMB rules for Suzhou Industrial Park (SIP) and Tianjin Eco City (TEC) in the middle of the year, about RMB 2 billion of loans have been approved from Singapore-based banks to companies in the two industrial parks. b. Equity Markets. In 2012, stock exchanges and regulators in Malaysia, Thailand and Singapore launched the ASEAN trading link to offer easy access to each other’s stock markets. Singapore and China have also established a Direct Listing Framework for Chinese companies last year. The framework will facilitate interested Chinese companies seeking direct listing opportunities in Singapore. c.  Debt Markets. ASEAN securities regulators have since April last year implemented common disclosure standards, which would allow issuers to issue debt securities across various ASEAN markets with a single prospectus.
The UK government’s plans for insulating retail banking are, therefore, a central element of the plans to make the UK’s large and complex banks resolvable. The proposals in the recent Liikanen Report on the structure of EU banks are welcome in seeking to achieve the same goal. Both Vickers and Liikanen can be viewed as working with the grain of the broader international agenda on resolution regimes. But bail-in can be attractive when a distressed group does have viable parts and sufficient uninsured debts covered by the bail-in power. As the UK’s resolution authority, the Bank is working closely with the FDIC on how to operationalise this type of resolution strategy. Meanwhile, the FSB will, over the next month or so, be publishing a consultative paper on resolution-strategy planning. The prospect of taking losses via resolution gives debt holders a strong incentive to monitor banks’ risk taking. That will be a first order change for the financial system. Expose management to tail risk: payment in subordinated debt Once debt holders are unambiguously exposed to loss, the authorities need to consider whether to require management to be paid to a significant extent in subordinated debt: an idea recently endorsed by the Liikanen Committee. 6 Having managers exposed to instruments whose value depends on the survival of their firm would give them a healthy incentive to maintain a safe and sound bank. There should also be a review of the structure of remuneration for desk-level bankers – tying pay to the medium-term success of the firm.