MANILA, PHILIPPINES - The ASEAN+3 Asian Bond Markets Initiative (ABMI) has brought together a panel of experts to look into the development of a regional bond settlement mechanism as part of its efforts to develop Asia's nascent local currency bond markets.
The Group of Experts (GoE) will give their views on the current settlement system, as well as examining the business case for a new cross-border mechanism aimed at improving the clearing and settlement of regional bond transactions. Their recommendations will go to ASEAN+3 member countries (Association of Southeast Asian Nations plus People's Republic of China, Japan and Republic of Korea) by April 2010.
The GoE includes representatives from ASEAN+3 countries and 7 international and regional experts. Leading public and private sector institutions, including national central securities depositories from ASEAN+3, international central securities depositories, global and regional custodians, and the Asian Development Bank (ADB) are also among the members. The Republic of Korea (Korea Securities Depository) is the current chair.
"There have been suggestions over many years to set up some kind of 'AsiaClear', and now the time has come to examine the business case in depth. If it looks worthwhile, we will make recommendations based on a broad consensus of national and international players," said Jong-Wha Lee, Head of ADB's Office of Regional Economic Integration.
The GoE will look at each domestic market in the region, identify the main barriers to cross-border bond settlements and clearing, propose a roadmap for their removal, and make recommendations to ASEAN+3.
"Discussions in the past on better institutional arrangements for cross-border bond transactions and settlement were scattered and lacked driving force. The idea of the GoE is to provide a forum with participation from all stakeholders in the market, with a direct communication channel with policy makers. I believe this is an ideal setting for making progress," said Inseok Shin, GoE Chair and Advisor at Korea Securities Depository.
The GoE, which was endorsed by the ASEAN+3 Finance Ministers in May this year, has also floated ideas to reduce the cost and risk of cross-border bond transactions and to expand and integrate the ASEAN+3 capital markets. These include a new international securities depository to facilitate cross-border investment in the local securities markets, and a special-purpose 'Asian Payments Bank' to eliminate settlement risk on foreign exchange transactions. Kickoff meetings were held in April 2008, Kuala Lumpur, Malaysia and in Seoul, Republic of Korea in July 2008.
"We see (the GoE) as a very important initiative to assist in the development and widening of investment into, and across, Asia. The timing is perfect as we are seeing the Asian debt markets maturing, and benefit can be obtained from the global knowledge and experience of GoE members," said Paul D. Hedges, Executive Director, Worldwide Securities Services, J.P. Morgan, Singapore.
National members of GoE are China Government Securities Depository Trust and Clearing Co. Ltd., Hong Kong Monetary Authority, PT Kliring Penjaminan Efek Indonesia (KPEI), Indonesian Central Securities Depository / PT KSEI, Indonesian Central Counterparty / PT KPEI, Japan Securities Depository Center, Inc., Merrill Lynch Japan Securities Co. Ltd., Korea Securities Depository, CIMB Investment Bank Berhad, Deutsche Bank (Malaysia) Berhad, Deutsche Bank AG, Manila, Philippine Securities Settlement Corporation, Singapore Exchange Limited, United Overseas Bank Ltd, Thailand Securities Depository Co. Ltd., Bangkok Bank Public Company Ltd, Viet Nam Securities Depository. International members are Asian Development Bank, Euroclear, Citi, Clearstream, J.P. Morgan, Mizuho Corporate Bank, and Standard Chartered Bank.
The ABMI was set up by the ASEAN+3 Finance Ministers in 2003 to boost local currency bond markets and to channel Asian savings into the region. Since then, local currency-denominated bond markets have grown in size and diversity, with issuance from various parties, including international financial institutions and multinational corporations.
For further inquiries:
Asian Development Bank:
Office of Regional Economic Integration (OREI)
6 ADB Avenue, Mandaluyong City, 0401, Metro Manila, Philippines
Project Officer: Chiemi-Jamie Kaneko (Ms.), Senior Financial Market Specialist