An Asian Perspective on Global Financial Reforms

Peter J. Morgan, Victor Pontines
JEL codes: 
ADBI Working Paper Series

The purpose of this study is to better understand the likely impact on Asian economies and
financial institutions of various recent global financial reforms, including Basel III capital
adequacy and liquidity rules. Part one reviews the lessons of the global financial crisis (GFC) of
2007–09 and their relevance for Asian economies. Part two describes the major regulatory
reforms that have been announced and possible concerns about their impacts on emerging
economies. Part three reviews the literature aimed at quantifying the impacts of Basel III capital
adequacy rules. Part four develops our methodology and analysis of the quantitative impact of
Basel III capital adequacy rules on a panel of Southeast Asian financial institutions with
emphasis on the effect on economic growth. Finally, the study concludes with a discussion on
the policy implications of the results obtained from the previous section for Asian financial
sectors and economies. Overall, we find that the Basel III capital adequacy rules are likely to
have limited impacts on economic growth in Asia, but other financial regulations, including
liquidity standards and rules for over-the-counter (OTC) derivatives, could have stunting effects
on financial development in the region.