Working Committee on Financial Services Liberalization (WC-FSL)

​A. Background

ASEAN aims to achieve a more integrated financial services sector through enhanced financial liberalization among ASEAN Member States (AMS). Free flow of trade in services, including financial services (i.e., banking services, insurance services, capital markets), is one of the important elements in realizing the ASEAN Economic Community (AEC) Blueprint 2025, where there will be substantially no restrictions to ASEAN services suppliers in providing services and in establishing companies across national borders within the region, subject to domestic regulations.

The WC-FSL was created to coordinate the initiatives to achieve the FSL objectives. It is composed of technical-level representatives from ASEAN financial services regulators/supervisors. The Philippines is represented in the WC-FSL by the Department of Finance, Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission, and Insurance Commission.

B. Strategic Action Plan (SAP) for FSL

The SAP for FSL under the AEC Blueprint 2025 is as follows:

End Goal​	Policy Action
​​ More integrated financial services sector through enhance​d financial ​liberalization among AMS Promote financial stability coordination (i.e., publication of financial safeguard measures; and study on relationship between financial liberalization and stability)	Progressive liberalization of financial services under ASEAN Framework Agreement on Services (AFAS) / ASEAN Trade in Services Agreement (ATISA) Substantial liberalization and integration of ASEAN insurance markets Continue publication of financial safeguard measures Study relationship between financial liberalization and stability, including recommendations to improve financial stability

C. Financial Services Commitments under the ASEAN Framework Agreement on Services (AFAS)

The AFAS was signed on 15 December 1995 in Bangkok, Thailand, which seeks to enhance cooperation in services amongst Member States, substantially eliminate restrictions to trade in services amongst Member States and liberalize trade in services by expanding the depth and scope of liberalization beyond those undertaken by Member States under the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO).

The packages of commitments on financial services under the AFAS are negotiated in the WC-FSL on a two-year cycle. Negotiations are done through a request-offer approach where the AMS exchange lists of specific requests and offers for market access and liberalization of financial services sectors. The packages of commitments are listed in the Schedule of Commitments (SOC) and formalized via Protocols signed by the ASEAN Finance Ministers.

Consistent with existing laws and regulations, the Philippines committed the liberalization of the following sectors:

• Insurance – foreign equity participation in insurance companies providing life and general non-life insurance services and reinsurance/retrocession services;
  
• Capital market – Market access improvements in securities stock broker dealer through the establishment of a branch office; foreign equity participation in investment houses, factoring and financial leasing companies; and
  
• Banking – foreign equity participation through one of the three (3) modes (domestic bank, locally-incorporated subsidiary, and branch); bancassurance; electronic banking and outsourcing of banking support and marketing activities, except inherent bank functions.

D. Milestones

Accomplishments and ongoing initiatives by the WC-FSL, to date, include the following:​

• Concluded eight (8) packages of FSL commitments under the AFAS.
• Engaged ASEAN Dialogue Partners to conclude free trade agreements with Australia, New Zealand, India, Japan, Korea, and Hong Kong. It is currently negotiating the Regional Comprehensive Economic Partnership (RCEP) with China, Australia, New Zealand, India, Japan, and Korea.
• Developed a scoremap which provides a snapshot of ASEAN’s collective progress in financial services liberalization across various sub-sectors.

​Working Committee on ASEAN Banking Integration Framework (WC-ABIF)

​​​A. Background

The ASEAN Banking Integration Framework seeks to guide and facilitate the entry and operation of Qualified ASEAN Banks (QABs) in ASEAN member states (AMS) to promote equal access and treatment among ASEAN banks. The WC-ABIF focuses on facilitating (i) effective operationalization of the banking integration process; (ii) initiatives to promote improvement in regulatory frameworks; and (iii) cooperation and financial stability arrangement for regional financial integration.

B. ABIF Guidelines

In December 2014, the ASEAN Central Bank Governors agreed on the ABIF Guidelines under which bilateral negotiations in the entry of QABs can be facilitated. The framework defined QABs as high quality banks that are strong and well managed and compliant with specific qualifications, including the prudential requirements of host countries. The member states may progressively liberalize banking services and participate in the bilateral negotiations based on the stage of development and readiness. The banking integration process will not only focus on the entry of QABs but will also include the development of capacity-building programs to ensure that all countries are able to meet the objectives of the framework, and establishment of financial stability arrangements to promote effective supervision of banks.

The Bangko Sentral ng Pilipinas (BSP) concluded negotiations with BNM in April 2017. The BSP also signed a Letter of Intent to begin ABIF talks with the Financial Service Authority of Indonesia and Bank of Thailand.

The ABIF sets an aspirational timeline for AMS that by 2020 all AMS have concluded or in the stage of finalizing at least one bilateral arrangement per member state. It is this agreed aspirational timeline which provided further impetus to the liberalization of foreign bank entry into the Philippines with the passage of Republic Act No. 10641 in July 2014. This is the enabling law not only for the implementation of the ABIF but also for the entry of other international banks.

C. Strategic Action Plan (SAP) for ABIF

The SAP for ABIF is as follows:

​End Goal	Policy Action
Greater role of Qualified ASEAN Banks (QABs) in facilita​ting intra-ASEAN trade and investment Greater coherence of banking regulations for all AMS to support financial integration, consistent with international standards Greater regional strength of the banking sector to support ASEAN financial sector resilience	Conclude agreements under the ABIF Enhance regulatory transparency, standards, and coherence Promote cooperation on supervisory and crisis recovery, management and resolution arrangements for regional financial integration

D. Milestones

Key accomplishments include:

• Concluded negotiations of ABIF agreements between Indonesia and Malaysia; Philippines and Malaysia; and Malaysia and Thailand
  
• Completed a regulatory scan of AMS and agreed on the common areas to promote regulatory coherence
  
• Developed Guidelines for Monitoring and Reporting on the Progress of Agreements under ABIF, including monitoring templates
  
• Formulated key performance indicators (KPIs) for banking
  
• Initiated monitoring of intra-ASEAN indigenous banks and intra-ASEAN financing
  
• Engaged the ASEAN Bankers Association (ABA) and ASEAN Business Advisory Council (ABAC) on banking integration issues
  
• Continues the capacity-building programs under the ABIF Learning Roadmap

​​Working Committee on Capital Account Liberalization (WC-CAL)

​​A. Background

Ensuring that the financial sector is inclusive and stable remains a key goal of regional economic integration. The financial sector integration vision for 2025 encompasses three strategic objectives, namely: financial integration, financial inclusion, and financial stability, as well as the three crosscutting areas (Capital Account Liberalization, Payment and Settlement Systems, and Capacity Building). The ASEAN Economic Community (AEC) Blueprint for 2025 aims to enhance capital account liberalization to encourage greater flows of capital among ASEAN Member States (AMS) to facilitate cross-border investment and lending in the region following these guiding principles:

1. Ensure an orderly capital account liberalization, consistent with AMS’ national agenda and the readiness of their economies;
   
2. Allow adequate safeguard measures against potential macroeconomic instability and systemic risks that may arise from the liberalization process, including the right to adopt the necessary measures to ensure macroeconomic and financial stability; and
   
3. Ensure that the benefits of liberalization are shared by all AMS. ASEAN will continue to monitor the progress of capital account liberalization among AMS by utilizing the ASEAN Capital Account Liberalization Heatmap and Individual Milestones Blueprint.
   

The WC-CAL is currently co-chaired by the Bangko Sentral ng Pilipinas and the State Bank of Vietnam for the period 2018-2020.

B. Strategic Action Plan (SAP) for CAL

The SAP for CAL under the AEC Blueprint 2025 prescribes the following deliverables:

End Goal​	​Policy Action
Substantial liberalization in AMS’ capital account	Enhance CAL Heatmap methodology as a monitoring tool Continue capital account liberalization
Strengthened policy dialogue and information exchange mechanism on capital flo​ws statistics and capital flow measures among AMS	Institutionalize policy dialogues on CAL Enhance policy dialogue to focus on safeguard measures related to monetary and financial stability Develop a secured database on capital flow statistics and capital flow measures for policy dialogue reports

C. Status of Accomplishments

As of date, the WC-CAL has accomplished the following:

1. Revised the CAL Heat Map, which are being updated regularly;
   
2. Finalized Individual CAL Plans, which is to be implemented and monitored regularly;
   
3. Promoted Local Currencies Usage for Trade and Investment, which is to be updated periodically;
   
4. Conducted Policy Dialogue Process on Safeguard Mechanisms for CAL, which shall be regularly conducted;
   
5. Conducted Survey of Safeguard Measures, to be updated regularly;
   
6. Finalized and published the Policy Paper on “Capital Account Safeguard Measures in the ASEAN Context”;
   
7. Started initiatives to develop and launch secured CAL policy dialogue database, to be established through the ASEAN Secretariat’s online platform; and
   
8. Conducted capacity-building initiatives to support CAL.

Working Committee on Capital Market Development (WC-CMD)

​A. Background

The ASEAN Economic Community (AEC) Blueprint has envisioned a region with interlinked capital markets that facilitate greater trade and investment flows. The WC-CMD was established to oversee efforts to build capacity and lay the long-term infrastructure for development of ASEAN capital markets, with a long-term goal of achieving cross-border collaboration among AMS capital markets. Key milestones of the WC-CMD include the following:

1. Developed the ASEAN Bond Market Development Scorecard (BMDS) to monitor the progress of development, openness and liquidity of bond markets in the region;
   
2. Conducted surveys and presentations of best practices and country experiences on over-the-counter (OTC) derivatives markets and regulations;
   
3. Coordinated with other ASEAN WCs on the development of the ASEAN Capital Market Infrastructure (ACMI) Blueprint, which aims to establish clearing, settlement and depository linkages among the ASEAN capital markets; and
   
4. Achieved progress in facilitating retail access to domestic bond markets.
   

B. Strategic Action Plan (SAP) for CMD

The SAP for CMD under the AEC Blueprint 2025 prescribes the following deliverables:

End Goal	Policy Action
Deep and liquid ASEAN capital markets	Enhance ASEAN trading infrastructure to support more cross-border trading activity Adopt ASEAN Disclosure Standards for Debt Securities Have suitable wide range of securities eligible for central bank liquidity
Improved access to capital markets	Encourage the u​se of recommended contractual clauses in project and loan documents to facilitate migration to capital markets Introduce government-backed risk mitigating backstop such as creating new forms of securitization
Promote retail access to bond markets	Granting retail investors access to purchase government bonds

C. Key Priorities

The WC-CMD has engaged with the ASEAN Capital Markets Forum (ACMF) to collaborate on initiatives focusing on infrastructure financing and sustainable financing. For 2019, WC-CMD’s priorities are as follows:

1. Enhance the role of ASEAN capital markets to support infrastructure financing, including the utilization of Islamic financing. The WC-CMD has set-up an Infrastructure Financing Working Group (IFWG) which will focus on: (a) developing standardized contractual terms for project documents that are practical and effective to facilitate financing through the capital markets while taking into account the ACMF’s work on developing standardized contractual terms for project finance documents; and
   
2. Promote sustainable financing, including the adoption of the ASEAN standards on sustainable financing in collaboration with ACMF. The Sustainable Finance Working Group (SFWG) was established to: (a) promote government and quasi-government green, social and sustainability bond issuances; and (b) build demand for government and quasi-government green, social and sustainability bond financing.

Both the IFWG and SFWG will collaborate with other Working Committees including the ACMF and the Asian Bond Markets Initiative (ABMI) to drive the ASEAN sustainable finance agenda; engage with industry for exchange of views on sustainable investments; and coordinate capacity-building programmes in relation to sustainable financing.

Working Committee on Financial Inclusion (WC-FINC)

​About the WC-FINC

Created in 2015 as a working group under ASEAN Financial Integration, WC-FINC is tasked to deliberate policy actions and coordinate initiatives to enhance financial inclusion in region. The objectives, governance and reporting structure of WC-FINC are defined under its Terms of Reference (TOR). WC-FINC co-chairs report to the Senior Level Committee (SLC) and the ASEAN Finance Ministers and Central Bank Governors Meeting (AFMGM), via the ASEAN Finance and Central Bank Deputies Meeting (AFCDM).

The WC-FINC TOR, as well as the WC-FINC Financial Inclusion Framework, approved by SLC/AFCDM/AFMGM, defines the WC’s objectives, as follows:

1. Reduce the average financial exclusion level in ASEAN from 36.3% to 30%.
2. ​​Enhance readiness of financial inclusion infrastructure from 74.4% to 85%.
   
3. Increase access and quality of financial services to all segments of society in AMS.
   
4. Increase the level of financial literacy and consumer protection.

The average financial exclusion level of ASEAN Member States (AMS) is measured using data from the World Bank Findex,1 or based on the result of AMS national surveys, whichever is available. The readiness of financial inclusion infrastructure is based on a simple survey on whether financial infrastructure (e.g. credit bureaus, guarantee mechanisms, national IDs) necessary to achieve financial inclusion already exist in AMS.2 The other objectives are measured at the country level, but initiatives are regularly reported by WC-FINC members through a bi-annual survey.

To achieve the above objectives, the approved WC-FINC Strategic Action Plan (SAP) focuses on four Desired Outcomes (DO), each managed by sub-group of FINC members with an assigned lead:

DO1: Support national financial inclusion strategies

Lead: Bangko Sentral ng Pilipinas (BSP) and Autoriti Monetari Brunei Darussalam (AMBD)

​DO2: Elevate capacity building of AMS to advance inclusive and sustainable growth

Lead: Bank Negara Malaysia (BNM)

DO3: Enhance digital financial inclusion; and

Lead: BSP and Bank Indonesia (BI)

DO4: Increase awareness on financial education and consumer protection.

Lead: Otoritas Jasa Keuangan (OJK)

Most initiatives are implemented with support from, or in coordination with development partners like the Alliance for Financial Inclusion (AFI), the World Bank (WB) and the United Nations Capital Development Fund (UNCDF).

WC-FINC Chairmanship of BSP and AMBD

During the 5th Meeting of the WC-FINC in February 2018, the BSP and AMBD were designated as new co-chairs for two (2) years until its 9th Meeting in 2020. As Co-Chair of WC-FINC, BSP initiated the revision to the surveys of the WC-FINC to provide a more accurate picture of the financial inclusion in the ASEAN Region and capture more actionable information for the WC-FINC. The previous separate surveys were updated and consolidated into a single three-part survey covering: 1) Potential Macroeconomic and Financial Stability Risks and Opportunities in Implementing Financial Inclusion Strategies in the ASEAN Region; 2) Financial Inclusion Initiatives; and 3) Financial Inclusion Infrastructure. The set of enabling financial inclusion infrastructure of the survey was revised to reflect infrastructure/elements crucial for digital financial inclusion, such as national ID system, credit registry/bureau, movable assets collateral registry, warehouse receipt system, e-money, agent banking, and consumer protection regulations. The revised survey aims to facilitate a more focused monitoring of the financial inclusions risks, key initiatives, and outcomes of the AMS.

Key accomplishments of the WC-FINC

As of its 7th meeting in February 2019, the WC-FINC reported and/or completed the following:

1. Based on World Bank Findex data, there has been significant reduction in financial exclusion levels in ASEAN from 58% in 2011 down to 46% in 2017. The Findex data is collected once every three years. AMS national data, when available in the interim, shall be reported by WC-FINC.
   
2. Based on latest national data of AMS, ASEAN exclusion level was reported at 36.3%.
   
3. Based on WC-FINC survey, six (6) AMS already have their own Roadmaps or National Strategies for Financial Inclusion and three (3) have their Roadmaps or National Strategies for Financial Education. All ten (10) AMS already have a public credit registry or credit bureau while seven (7) have a credit guarantee institution.
   
4. A total of 28 capacity-building programs on various financial inclusion topics were conducted in 2018.
   
5. The following guidance notes/surveys have been completed:
   

• Guidance Notes on National Financial Inclusion Strategies
• Guidance Notes on Financial Education and Consumer Protection
• Guidance Notes on Digital Financial Services (DFS)
• Survey Report on Digital Financial Services in AMS (supported by World Bank).

The guidance notes serve as a reference for AMS in developing their own respective programs and policies on the covered topics. All guidance notes have already been published and can be shared to the public. The survey report on the other hand is for internal AMS use but a short version of the survey is currently being drafted for publication.

6. ​​​An online portal dedicated for WC-FINC has been completed, and is being managed by DO4 Subgroup. This portal serves as repository of information and documents​ related to financial inclusion, financial education and consumer protection work in AMS. It also hosts the various guidance notes developed by WC-FINC.

Priorities for 2019

The following financial inclusion priorities of WC-FINC for 2019 were discussed during the 7th Meeting in Bangkok, Thailand:

DO1: 

• Sharing of progress of implementation of national financial inclusion strategies
• Development of guidance notes (GN) on monitoring financial inclusion toolkit. The GN aims to provide an outline of proposed steps in formulating a financial inclusion strategy and best practices in the region, for the guidance of ASEAN countries.

​​​DO2:

• ​Sharing of Malaysia of its experience on AML/CTF and imSME

DO3:

• Sharing of country case studies on digital financial inclusion/digital financial services by AMS following presentations on Fintech (Singapore) and e-payments for financial inclusion (Thailand)
• Publication of the short version of World Bank’s Digital Finance Services Survey
• Publication of the GN on Digital Financial Services (DFS) and conduct of self-assessment on the adoption of DFS by AMS

DO4:

• The WC-FI​NC co-chairs have enjoined DO4 to consider digital financial literacy as a priority in 2019 consistent with their report to the SLC on 18 October 2018
  

Dev​elopment partners such as the World Bank, UNCDF, and AFI also provide support to the WC-FINC goals and initiatives. The World Bank provided support in finalizing the Survey Report on Digital Financial Services in AMS while UNCDF remains open to provide funding/technical assistance to AMS on various areas (e.g., geomaps of financial inclusion access points, MSME development, financial inclusion of women). AFI will deep-dive into selected AMS experiences through the AFI-ASEAN Fi​ntech for Financial Inclusion Study wherein the Philippines, Cambodia, Malaysia and Thailand have been requested to participate, subject to country approvals and bilateral engagements with AFI.

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1 Measured in terms of ownership of a formal account, including e-money. The opposite of this measure is considered by WC-FINC as the “exclusion” level.
2 Some AMS (e.g., Singapore) have indicated intent not to pursue establishment of some financial inclusion related infrastructures (e.g., law to support financial inclusion, financial inclusion monitoring framework, specific institution to support financial inclusion) due to unique country circumstances.

Working Committee on Payments and Settlements Systems (PDF File)

​​ASEAN Steering Committee on Capacity Building

​​A. Background

The SCCB was created in 2012 to actively engage with ASEAN central banks in developing capacity-building programs for ASEAN members to support the ASEAN financial integration. Part of the capacity-building process is the commitment of the ASEAN-5 central banks to host study visits for Brunei Darussalam, Cambodia, Lao PDR, Myanmar and Vietnam (BCLMV). The SCCB coordinates the matching of capacity-building needs and possible suppliers (e.g., subject matter experts/speakers), development of learning programs, and identification of funding requirements. It is co-chaired by the Asian Development Bank (ADB) and the South East Asian Central Banks (SEACEN) Research and Training Centre.

B. Key Accomplishments

1. Conducted more than 243 capacity-building courses in 2018 which benefited more than 644 participants from the CLMV member states;
   
2. Developed a self-assessment template that links demand and programs to the ASEAN Working Committees’ Strategic Action Plans and Learning Roadmaps and includes an assessment of effectiveness, and recommendations for improvements;
   
3. Coordinated with the Working Committees (WCs) regarding the funding arrangements to support the implementation of various capacity-building programs, subject to the approval and guidance of the Senior Level Committee (SLC); and
   
4. Prepared capacity-building plans, ADB bilateral program courses and customized SEACEN courses.

C. Recent Updates

2019 Capacity-Building Program. Under Pillar A “Courses for CLMV countries”, the SCCB aims to organize one (1) event under each WC for each jurisdiction given resource constraints. ADB will coordinate further with the members to finalize the courses. For other requested topics that cannot be accommodated, ADB has provided preliminary suggestions based on demand-supply matching with the course offerings from ASEAN-5 and SEACEN. Meanwhile, under Pillar B “ASEAN Financial Integration Framework customized courses”, the Co-Chairs will work on the priority topics submitted by BCLMV either through the development of customized courses or the expansion of regular SEACEN courses to accommodate more participants from BCLMV. Lastly, under Pillar C “Bilateral learning programs”, the ADB encouraged the BCLMV central banks to discuss their proposed bilateral study visits with their requested central banks and to inform them so that funds can be mobilized accordingly.