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Brexit may cast shadow on ASEAN efforts to integrate financial services


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Brexit may cast shadow on ASEAN efforts to integrate financial services

Apotential U.K. exit from the European Union, known as , could lead to slower financialintegration among member countries in Southeast Asia's fledgling regionaleconomic bloc, according to insurance industry executives at a conference inSingapore.

ForASEAN nations in the region's 10-member bloc, dubbed the ASEAN EconomicCommunity, or AEC, aBrexit could make an expected long road to financial integration even longer,Anna Tipping, a partner at law firm Norton Rose Fulbright, said at a conferenceon insurance M&A in Asia.

Theeconomic union, launched at the end of 2015, also includes several signatoriesto the Trans-Pacific Partnership, a landmark trade deal among a dozen PacificRim nations, including the U.S., that will ease restrictions on financialservices, among other areas.

Tippingsaid such pacts are initially fragile at garnering support. She noted thatfollowing the Treaty of Rome, which ushered in the European Economic Communitywith six countries in 1958, it took 35 years before concrete action was takenon cross-border services.

"ABrexit could cause regulators and others to question the pace of AECintegration on financial services," Tipping said. "That would beunfortunate because now the will is there, though it will also be a longprocess."

With the AEC in its infancy, many recognize the numerousroadblocks that still need to be overcome to achieve financial integration between ASEAN nations.

Regardinginsurance M&A in particular, Indonesia is not ready to compete in an openAEC, said Fahrul Yusuf, head of the corporate M&A practice group at SSEKLegal Consultants.

"Indonesiawould be slow to open up insurance to wider ASEAN M&A, same as banking andother financial services," Yusuf said. He added that eventhough insurers in Indonesia can invest a small portion of domestic fundsabroad, AEC members need to harmonize rules among regulators in the bloc for awider reach.

Yusuf'sview was echoed by Sutee Mokkhavesa, senior executive vice president for riskand strategy at Thailand's MuangThai Life Assurance PCL.

"Capitalrisks for AEC-wide insurance offerings are not widely understood now," hesaid, adding that while insurance firms are allowed to invest in equities andother securities abroad, there are regulatory restrictions.

Butwhile these issues must be overcome to expedite financial integration withinthe AEC, Sutee highlighted how a Brexit may leave policymakers gun-shy aboutdeeper union in areas such as financial services.

Henoted that the European Economic Community has established deep rules onservices and a common currency for 19 of the 28 EU members under one centralbank; a Brexit may be perceived as undermining these efforts.

"TheU.K. is not part of the currency union, but a break from economic union afterso much work would raise questions among AEC members," he said.