There are already many ongoing initiatives, for instance, promoting the usage of local currency in the region, the ASEAN Banking Integration Framework, the Asian Payment Network, and the Asian bond and capital market initiatives. Despite progress made thus far, financial institutions and policymakers in the region could step up our joint efforts in various ways. Let me now turn to immunity, which is equally important under the increasingly volatile, uncertain, complex, and ambiguous world in order to keep the financial system resilient throughout and thus be able to continue to support their clients and the real economy. 4  As the financial system is the blood vessel of the economy, immunity needs to start from safeguarding against blood infection. We will need to ensure that banks have adequate capital and provisioning cushion to be able to withstand swings of economic cycle and financial volatility. The Bank of Thailand welcomed the post GFC’s regulatory reform addressing concerns on systemic risks including the conservation buffer, the countercyclical buffer, G-SIBs and D-SIBs, as well as the recovery and resolution plan to further strengthen financial safety net. To complement these rules, and build a better immune system that is strong and resilient through any cyclical or structural shocks, I believe we need to target the underlying factor contributing to immunity, namely, the culture and behaviour of banks. Fundamentally, an organisation is predominantly defined by its behaviour and culture.
Looking forward, roles of Asian banks as intermediary could be diminished on the back of the growing capital markets and shadow banking, which includes not only traditional ones like asset management companies and savings cooperatives, but also more modern ones like crowd-funding and peer-to-peer lending. Capital account liberalization will also lead to asset diversification abroad. Banks’ funding sources are likely prone to be more vulnerable and volatile, with the increasing interconnectedness between banks, non-banks and capital markets. After many years of consolidating our financial systems after the Asian financial crisis, technology could fragment our financial systems in an unprecedented way. Regulatory arbitrage could lead to pockets of vulnerability, particularly in the less-regulated or unregulated areas of shadow banking. Ladies and gentlemen, the need for rapid transformation in Asia is not limited to only banks and financial institutions. Changing technology, changing demographic structure, and changing global operating environment also necessitate that Asian businesses transform themselves to be able to compete in the new environment, where productivity is key. In addition, they need to improve their risk management and immunity to be able to cope with increasing volatility and uncertainties of the modern world. It is also crucial that Asian banks and businesses understand developments in the society at large that could affect their operating environment, chief among these is income inequality.