Financial Regulation in Asia - A New Model for Regional Cooperation
Research theme: Governing markets
Duration: November 2013 to October 2016
Professor Andrew Mitchell, Law, UoM
Dr Jikon Lai, Arts, UoM
Mr Andrew Godwin, Law, UoM
Professor Andrew Walter, Arts, UoM
Professor Ian Ramsay, Law, UoM
Professor Kevin Davis, Business & Economics, UoM
Professor Douglas Arner, University of Hong Kong
Datuk Seri Panglima Andrew Sheng, Gung Global Institute
Professor Wataru Takahashi, Osaka University
Professor Ken Waller, RMIT
The increasing sophistication of Asian financial markets has the potential to create many of the problems experienced in the West in Asia. Further, recent years have seen rapid and sweeping reforms to financial regulation in Europe and the United States. These developments mean there is now an opportunity to pro-actively identify lessons learned from the West’s development and regulatory integration experience, as well as the unique circumstances and risks present in the Asian context, to evaluate the suitability of global regulatory frameworks in Asia and the value that regional cooperation could play in the development of Asian financial regulations. In particular, this research project explores whether greater regional cooperation in financial regulation and integration is needed in Asia, in light of the US/EU-centric development of international regulatory standards and rules, and the appropriateness of possible forms of regional architectures to achieve greater regional cooperation. The project is novel due to its inter-disciplinary approach and its examination of the relevant issues from a variety of perspectives such as finance, law, politics and international relations.
1. Asia and Basel III: How much buy-in?
One important effect of the recent global financial crisis is that the membership of key institutions for international regulatory standard-setting, notably the Financial Stability Board and the Basel Committee on Banking Supervision, expanded to include emerging country members of the G20. China, India, Indonesia, and South Korea are now full members of both the FSB and BCBS. As these institutions work by consensus, all signed up to the Basel III agreement in 2010 and to the many related standards that have since been issued. This paper asks whether this reflects buy-in by emerging Asian countries to Basel III and it explores how this might be measured. I explore the level of engagement of both public officials and private firms with Basel III standard setting and argue that significant gaps remain in terms of perceived relevance and understanding of Basel III in emerging Asia. This suggests that the implementation challenges remain substantial. Download [PDF, 59.6 KB]
2. Crowd sourced equity funding
Crowd sourced equity funding (CSEF) involves the sale of typically small capital interests in companies set up by promoters, through Internet websites, to potentially numerous investors. CSEF is aimed principally at early stage capital-raising or seed capital by start-up companies. The interest in CSEF is in part driven by what is seen as its potential to improve access to capital for innovative knowledge-based start-up companies. This paper reviews the benefits and risks of CSEF, examines international developments, identifies key issues for resolution in identifying an appropriate regulatory framework for CSEF, and concludes by posing several research questions. Download [PDF, 34.9 KB]
3. Market Access
This paper offers brief preliminary observations on the state of cross-border market access to financial sectors in Asia using data from the World Bank’s Services Trade Restrictions Database. Although there are shortcomings to this data, it nevertheless provides useful insights into variations in existing policies and regulatory restrictions imposed on foreign providers of financial services. The paper then evaluates FTAs that Australia has signed with selected countries in the region and finds that Australia has not secured better market access commitments with agreements that are currently in force. Download [PDF, 1.16 MB]
4. Financial Supervisory Structures in Asia
The allocation of financial supervision responsibilities across various agencies is a topic of some importance, particularly given the apparent failings of various models exposed by the global financial crisis. There is a wide range of current and potential models for this aspect of regulatory architecture. This short background paper provides some information on structures currently found in the Asian region and poses some of the questions which need to be considered in assessing suitability. Download [PDF, 1.42 MB]
5. Regional Financial Architecture
This paper discusses regional financial architecture under three headings – market integration, safety-net, and monitoring and surveillance – and concludes that regional financial integration is still low with the commitment to facilitating more rapid financial liberalisation questionable. Regional institutions to monitor financial markets are still weakly resourced, similarly the level of policy coordination in the region. Download [PDF, 56.2 KB]
6. The Asia Region Funds Passport Initiative – Challenges for Regulatory Coordination
The Asia Region Funds Passport (ARFP) Initiative grew out of a recommendation in the report of the Australian Financial Centre (known as the Johnson Report). The concept was subsequently introduced as an exploratory policy initiative within the APEC Finance Ministers’ Process. On 29 September 2013, four economies - Australia, New Zealand, Korea and Singapore – signed a Statement of Intent and a Framework Document, under which a framework was agreed to pilot the initiative. This discussion paper considers the challenges for regulatory coordination in relation to the ARFP. It commences with some background information on this initiative and the benefits that it is expected to achieve. It then outlines the practical arrangements that are required to support it, including the need for coordination between the member economies. Following this, the paper explores the framework within which effective coordination might be achieved by reference to some of the literature in this field and also the issues and challenges that are specific to the ARFP. The paper ends with some concluding remarks, including what effective coordination on this initiative means for regional coordination in the area of financial regulation generally. Download [PDF, 80.3 KB]
7. Financial Regulation in Asia: Countries of Interest
Any study of regional harmonisation of financial regulation needs to identify what constitutes the region of interest. This background paper provides information on various ways in which international agencies have defined “Asia”. It suggests how an appropriate definition might be made which captures sufficient variability in financial structure and development to enable analysis of the challenges facing regional harmonisation. Download [PDF, 8.28 KB]
1 December 2014
The project team organised a one day conference on Asian Financial Regulatory Cooperation in Melbourne on 1 December 2014, with in-kind support from ANZ Bank. Investigators and external partners of the project presented papers on a number of issues that are currently on the agenda of global finance: Basel III standards, shadow banking, bank resolution regimes and regional funds passport schemes. The conference attracted wide participation from members of industry, regulatory agencies, think tanks and universities who contributed to a productive and vibrant conversation. The challenges and trends confronting regulatory coordination in the Asian region were identified and discussed, and will inform the following year’s work of the project team. A copy of the conference programme can be downloaded here [PDF, 322 KB]. The report on the Conference on Financial Regulation in Asia can also be downloaded here [DOCX, 51.4 KB].
1. The Asia Region Funds Passport Initiative – Challenges for Regulatory Coordination [PDF, 126 KB]. Andrew Godwin and Ian Ramsay.
2. Emerging Countries and Basel III: Why is Actor Mobilization so Low? [PDF, 2.59 MB]. Andrew Walter.
3. Liquidity Regulation in Asia: Are there benefits from Basel? [PDF, 820 KB]. Kevin Davis.
1. Shadow banking: Opportunities and Challenges in Asia [PPTX, 95.6 KB]. Douglas Arner.
2. Bank Resolution and Bail-in Regimes. Where does Asia Stand? [PPTX, 964 KB] Michael Taylor.