ASEAN Banking Integration and Its Impacts to the Banking Industry in Indonesia

Abstract

This study aimed to know how the development of economic liberalization has had an impact on tight competition in the banking industry sector. Therefore, to face the challenges of competition in the region, the ASEAN Banking Integration Framework (ABIF) was established. ABIF was established on the initiative of regional cooperation in the banking sector for the ASEAN region as stipulated in the ASEAN Framework Agreement on Services (AFAS). The AFAS agreement is useful to accelerate ASEAN Banking Integration. The type of research method used is legal normative by conducting a libary research. In its implementation, ABIF is conducted bilaterally with other ASEAN member countries by negotiating market access and operational coverage of banks in other ASEAN countries based on the policies of the Qualified ASEAN Banks (QAB). As a form of Indonesia's commitment to support the ASEAN Banking Integration, on January 18, 2016, Indonesia has ratified the Protocol to Implement the Sixth Package of Commitments on Financial Services under the ASEAN Framework Agreement on Services with the enactment of Law Number 4 of 2018. Post the ratification of the Sixth Protocol AFAS turned out to have an impact on the banking industry in Indonesia, that every Indonesian bank wishing to expand into other ASEAN countries was required to comply with the QAB policies. The benefits of banks that have met the QAB will get an increase in affordable banking products and quality in the country. In order to obtain legal certainty for Indonesian banks with QAB standards, the reciprocal principle will be applied, which allows Indonesian banks to operate in other ASEAN countries as well as local banks in their destination countries.