Monday, March 23, 2015


As Charles Calomiris and Stephen Haber have pointed out in their book Fragile By Design, the logic of banking is politics more than it is economics;
...chronic banking crises and scarce credit are not accidents due to unforeseen circumstances. Rather, these fluctuations result from the complex bargains made between politicians, bankers, bank shareholders, depositors, debtors, and taxpayers. The well-being of banking systems depends on the abilities of political institutions to balance and limit how coalitions of these various groups influence government regulations.
Fragile by Design is a revealing exploration of the ways that politics inevitably intrudes into bank regulation. Charles Calomiris and Stephen Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why some endure while others are undermined, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues.
With the above in mind, we take note of a change in the bargain among 10 ASEAN countries, scheduled for this coming December;
Major banks are realigning their businesses in Southeast Asia, where a winding back of cross-border tariffs and regulations has led to sharp rise in regional trade ahead of the launch of the ASEAN Economic Community (AEC).
With even more international trade expected;
Last year cross-border trade with the 10-nation Association of Southeast Asian Nations (ASEAN) surged 26 percent to $323 billion. However, this figure is expected to grow still further once the AEC is instituted by the end of 2015 with an anticipated combined gross domestic product of $2.1 trillion.
And rather than have that trade financed by European and American megabanks, or others; banks will face stiff competition from the regionals through the ASEAN Banking Integration Framework (ABIF), expected to be implemented by 2020.
Under ABIF an ASEAN-based bank will be re-classified as a local bank across the 10 ASEAN countries, as opposed to being categorized as foreign banks in a neighboring country. This will enable them to compete with an influx of major banks from China and Japan.
There's a new game of Asian bank bargaining afoot.

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