Financial globalisation in ASEAN+3: Navigating the financial trilemma

Abstract

This paper offers a critical narrative of the ASEAN+3 economies' tryst with financial globalisation over the last two decades, with a specific focus on the evolution of the region's internationalisation of the financial sector. By applying the ‘Financial Trilemma’ framework, we posit how the recent emergence of foreign fintech players, digital banks, and Big Techs in finance are promoting further de facto financial integration in the region whilst also simultaneously exacerbating financial stability concerns alongside posing other non‐financial risks to market integrity, consumer privacy, and data protection. The regulation of fintechs and Big Tech in finance introduces a different type of policy trilemma for regulators across three discrete policy objectives/outcomes, viz. financial stability/market integrity; market efficiency/competition; data privacy/consumer protection. We argue that this necessitates greater regional financial cooperation by the ASEAN+3 economies which inevitably requires regional financial regulators to be prepared to forsake a degree of sovereign autonomy over respective national financial policies and to stave off systemic risks arising from the interconnected nature of transnational digital banking conglomerates.