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Three Essays on Banking Integration in ASEAN

 

Author: Le, Nguyen minh Phuong
Under the direction of: Philippe Gillet and Duc Khuong Nguyen
Paris-Saclay University
English Language English text

Keywords: Management sciences, ASEAN, Banking integration, Cross-border banking, Competition, Banking stability, Asean, Association of Southeast Asian Nations, Southeast Asia, Banking, Finance

 

Read the thesis.

 

Abstract
Banking integration has been a significant source of finance for the catching-up process of ASEAN economies in recent years. These banking linkages bring many vital benefits, perhaps most prominently in the form of diversification for banks and risk-sharing, but also have potential costs in terms of contagion risks. Therefore, it is not surprising that financial linkages and in particular bank lending ties have been identified as one of the main channels of transmission of the latest crisis from advanced economies to this area. While numerous research has been carried out in developed countries, there is very little research focusing on emerging markets, especially in ASEAN. This thesis aims to investigate the banking integration in ASEAN countries, focusing on several dimensions : measures, determinants, competition, and stability. This thesis first introduces extended measures of banking openness and the overall balanced degree of banking integration through capital flows ; then highlights the main drivers of the banking integration in ASEAN, such as regulatory quality, bank size, and the global credit risk. Secondly, by a polynomial model and a threshold model, this study investigates the nonlinear and heterogeneous effects of banking integration on banking competition in ASEAN countries. Thirdly, the trade-off between risk-sharing possibilities and contagion risk of banking linkages was analyzed by testing how three aspects of banking integration affect the ASEAN banking system’s stability. Finally, some suggestions about essential policy implications for regional authorities are discussed with the findings, especially in the context of the ASEAN Economic Community.