The Asian Perspective
ADBI series on Asian Economic Integration and Cooperation
Edited by Masahiro Kawai, Peter J. Morgan and Pradumna B. Rana
This chapter examines the potential roles and institutional implementation of regional financial regulation in Asia. National-level financial surveillance and regulation continue to be the workhorse and the first line of action for preserving financial stability. Under the auspices of the Group of Twenty (G20) following the global financial crisis of 2007–09, there has been an attempt to forge a global consensus on financial reform measures based on proposals made by the Financial Stability Board (FSB) and to strengthen the role of the International Monetary Fund (IMF) both as a surveillance unit and as a global financial safety net. In this chapter we argue that there is a mediating role for regional-level institutions of financial regulation in Asia. This role includes: (i) monitoring financial markets and capital flows to identify regional systemic risks such as capital flows; (ii) coordinating financial sector surveillance and regulation to promote regional financial stability; and (iii) cooperating with global-level institutions in rule formulation, surveillance and crisis management. The Asian Financial Crisis of 1997–98 highlighted the potential value of financial regionalism, that is, regional-level cooperation in economic and financial policy. Many economies in the region found themselves subject to similar shocks and contagion, leading to volatile capital movements and the risk of “sudden stops” and reversals of capital flows.
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