EME banking systems and regional financial integration

March 2014

This report - prepared by a Study Group chaired by Andrew Khoo (Monetary Authority of Singapore) - develops a central bank perspective on the regional integration of EME banking systems and financial markets, assesses the drivers of these developments, and draws broad conclusions for policymakers. The findings are based on data from the BIS international banking statistics (IBS) and various other public sources, interviews with the private sector, inputs from central banks from non-CGFS jurisdictions, as well as reviews of the existing academic literature and case studies from select CGFS member jurisdictions.

The Group's findings suggest that, while regional bank expansion has the potential to affect the global financial system in a variety of ways, the still small overall footprint of regional banking groups means that current trends are unlikely to have significantly changed the risk profile of EME banking systems at this stage. Yet, broader effects are possible over time, as bank-level data points at balance sheet capacity for further cross-border expansion. Furthermore, business models of the larger, more systemically important EME bank affiliates are growing in sophistication, converging with those of similarly sized, more regionally focused advanced economy peers. With time, this may warrant policy responses in a number of areas, including efforts to improve regulatory environments and market infrastructures, and crisis prevention and resolution measures. 

Update December 2014: In August and October 2014 two follow-up workshops on EME banking systems and regional financial integration were held at the Monetary Authority of Singapore (MAS) in Singapore and at the Bank of Spain in Madrid, respectively. The summary of follow-up workshops was published on 23 December 2014.

JEL Classification: F36, G15, G2