ABAC says financial regulation needed after global economic recovery
By Ng Baoying, Channel NewsAsia | Posted: 11 November 2009 0237 hrs

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SINGAPORE: Financial regulation was one of the main issues discussed on the second day of talks by the APEC Business Advisory Council (ABAC) in Singapore.

The APEC business community said that a standard for financial regulation is essential to successful trade liberalisation. However, this should come only after the global economy has bounced back - because any tightened regulations now could derail the economic recovery.

"Financial regulation might kill the weak, fragile economic recovery. That's what we are very afraid of," said Yoshihiro Watanabe, chairperson, Finance and Economics Working Group.

Observers said that the global economic crisis has prompted policy makers to trend towards more stringent regulations. For the financial sector, these include looking at banks' capital adequacy ratios, leverage ratios and too-big-to-fail institutions.

"There are many, like capital adequacy, leverage ratio, and like, too big to fail issues. Those issues (are) very important issues. But the way of introduction must be very careful, with dialogue through private business people. Otherwise it (can) sometimes very dangerous," said Mr Watanabe.

Mr Watanabe suggested that there must be dialogue between the private sector and governments on crafting regulations to suit the new economic order that will emerge from the crisis, but timing will be important.

He said such new regulations should only be put in place when a full recovery is underway - perhaps in 2011.

As with all new policies, there are likely to be some teething challenges. According to experts, a forum like APEC could help smooth out the side-effects.

"Each economy is in a different stage of development and some have got a stronger financial system, and others are still developing, and the beauty of APEC is that we all work on a very collaborative manner," said Chong Siak Ching, chairperson, APEC CEO Summit 2009 Organising Committee.

"Therefore, we urge the government to work hand in hand with the private sector, with the other financial institutions, regional and international, to see how to strengthen the various financial infrastructures within the region," he added.

Mr Watanabe said: "We need to have a sustainable and inclusive growth, and also a balanced growth. And we have been discussing those points throughout the Singapore process.

"And like inclusive growth, we need to include those of social foundation, financial inclusion. And for financial inclusion, we need a new set of regulation for microfinance, micro remittance, micro insurance - all those have kind of a new agency, mobile banking, Internet banking, something like that. Proper regulation is needed."

This week's session will be the last time that ABAC leaders are meeting this year. Business leaders will have a consolidated list of key business issues and recommendations by Wednesday. These will be communicated directly to the 21 APEC Leaders at a dialogue session on Saturday.

- CNA/sc