The Readiness of Indonesia’s Banks Facing ASEAN Economic Community (AEC)

Abstract

The ASEAN Economic Community (AEC) declared in 2003 in Bali has begun in 2015. The main agenda of the AEC is a single market and production base that includes freight traffic, goods, services, investment, labor and capital. The financial sector is a sector whose implementation is allowed to be leased until 2020 before being fully implemented. In the banking sub-sector is agreed a scheme known as the ASEAN Banking Integration Framework (ABIF) in which ASEAN banks that meet the criteria as Qualified ASEAN BANK (QAB) can participate in the ABIF scheme. The QAB criteria are: (i) well managed (ii) have sufficient capital (iii) obtain recommendation from the authorities, (iv) pass the Basel provisions and (v) be considered important banks in the country of origin To see the readiness of Indonesia’s banks to participate in the ABIF mechanism, the authors conducted a study to answer the question of whether Indonesia’s banks are ready to participate in the ABIF mechanism. The methodologies used by the authors are to determine some criteria against the condition of Indonesia’s banks such as financial ratios and bank health, which then the authors compare to the conditions of banks in other neighboring ASEAN countries. The result is that Indonesia’s banks in particular the QAB category are ready to participate in the ABIF mechanism whose implementation will begin in full by 2020.