Banks in Indonesia, Philippines, Thailand and Vietnam urged to push for consolidation

Consolidation is imperative to stay competitive.

According to BBVA Research, broadly speaking, banking sector consolidation efforts have become more pronounced amongst the emerging ASEAN economies as they prepare themselves to face stiffer competition from larger banks in more developed ASEAN economies such as Singapore and Malaysia over the next 10 years with the establishment of ASEAN Economic Community (AEC) starting 2016. 

The AEC aims to allow free movement of goods, services and skilled labor across ASEAN as part of a European Union- tyle integration plan, without a common currency. The ASEAN banking integration framework, a part of the AEC agenda, would ease cross border financial investments, which would significantly increase competition from heavy weight banks in the region, adds BBVA.

"The ASEAN Economic Community Initiative opens high growth opportunities for banks within the region to tap a combined population of 600 million with an aggregate GDP of USD 2.4 trillion. Against this backdrop, consolidation efforts are imperative for major banks in Indonesia, Philippines, Thailand and Vietnam going ahead given their relatively small size and the lack of lending clout compared to their counterparts in Singapore and Malaysia."