Malaysia central bank: credit reporting could unite Asean markets

Asean Economic Community faces challenges, says deputy governor Muhammad bin Ibrahim

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Bank Negara Malaysia deputy governor Muhammad bin Ibrahim: Asean financial integration "critical"

Better credit reporting infrastructure has "considerable potential" to support financial integration between south-east Asian economies and further develop national financial systems, the deputy governor of Malaysia's central bank, known as Bank Negara Malaysia, said today (May 14).

Speaking at the Asean Risk Conference in Kuala Lumpur, Muhammad bin Ibrahim pointed to his own country as an example.

"The implementation of the central credit reporting information system in Malaysia, one of the most comprehensive in the world, has had a profound impact in transforming the credit landscape in [the country]," he said.

Bank Negara Malaysia collects credit data on the customers of Malaysia's lenders and produces credit reports, which it makes available to financial institutions on request. The information is hosted in a database known as the Central Credit Reference Information System (CCRIS).

Bin Ibrahim said the system had enhanced access to financing, strengthened risk management and encouraged responsible borrowing by Malaysia's corporate sector.

"These benefits can be extended more broadly by establishing and linking up similar systems across the [Asean] region," he argued.

The Association of Southeast Asian Nations, a regional organisation established more than 40 years ago, has a collective population of 600 million and is the world's sixth biggest economy if considered as a single entity. It is expected to make up the fourth-largest trading bloc globally by 2050, according to the OECD.

Member states are angling to deepen co-operation further this year through the establishment of the Asean Economic Community (AEC), a single market area first envisioned in 2007.

"Asean has made meaningful progress in the identification, articulation and implementation of principles to advance financial and economic integration among its members," bin Ibrahim said. He described financial integration as a "critical component" of the AEC.

But he also warned those principles would "continue to be tested" as countries "vary widely" in their domestic priorities and levels of economic development. "In a region as diverse as Asean," the deputy governor noted, "the challenges are substantially greater - but not insurmountable."

One of these challenges is access to financing for many businesses. The credit gap for small and medium-sized enterprises (SMEs) in east Asia is estimated at more than $250 billion.

"The difficulties in access to financing are compounded by underdeveloped financial systems [and] the need to manage multiple banking relationships across different markets," bin Ibrahim said. He also highlighted the lack of co-ordinated financial advisory support to help corporates navigate the regulatory and business environment in different jurisdictions.

"A larger presence of regional financial institutions can significantly reduce these challenges," the deputy governor said.

Policy-makers are hoping to boost such presence this year through the implementation of the Asean Banking Integration Framework (ABIF), which will grant member countries' banks access to each other's markets.

"Given the dominant role of the banking system in financial intermediation within the region's economies, the successful implementation of ABIF represents a key catalyst to drive deeper integration and enhance the region's growth potential," bin Ibrahim said.

With the conclusion of ABIF, Asean members are now pursuing reciprocal bilateral agreements, which will detail measures on market access and operational flexibilities for qualified banks, he added.

"We should witness an expanding network of bilateral agreements in the coming years," bin Ibrahim said. "The future looks bright."

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