Zeti: Financial integration in Asia must be strengthened

BANK Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said financial integration within Asia needs to be further strengthened to unleash the full potential of Asia.

"A more consolidated regional financial system would enable better matching of savings and investments in the region, allowing for Asia's large pool of savings to be channelled into productive use.

Speaking in the afternoon session of the Asia-Europe Meeting (ASEM) to address the global challenges in Kuala Lumpur yesterday, Zeti said regional financial integration is associated with increased capital mobility within the region, and a more interconnected financial system.

She said while the lack of regional financial integration previously has not been a constraint to economic consolidation, it does however bring several benefits.



"It would not only contribute to lowering intermediation costs but would also support intra-regional trade and investment," she said, adding it would also encourage part of Asian savings to be reinvested in Asia.

Zeti said several initiatives and efforts have already been taken to further deepen financial integration in the region, namely in the liberalisation of the financial sector and capital account, development of regional payments and settlements systems and greater cooperation among regional regulators and central banks.

She said in pursuing these priorities, consideration must, however, be given to the diversity of various economies within Asia.

"Various policies and reforms that are needed must be sequenced and aligned to the nature of the various economies to ensure such reforms do not lead to disruptions and financial instability," she said.