Banks based in Southeast Asia must seek regional alliances and mergers in order to survive stiffer competition from abroad, industry experts said yesterday.
Banks in ASEAN are now facing strong competition from international banks, bankers said.
The Association of Banks in Malaysia chairman Rozali Mohamed Ali said the situation exposes inefficiencies and poor risk-management mechanisms.
"The last words on the Asian financial crisis of 1997 have not yet been written but it is clear that the crisis was a watershed for the region," Rozali told a two-day ASEAN banking conference in Indonesia.
He said that financial institutions within ASEAN must discard obsolete practices and become "more diverse, competitive and constantly innovative" to cope with market liberalization under the WTO.
To survive, they must deepen cooperation and build strategic alliances to enlarge their markets, enhance skill transfer and increase efficiencies to compete with the foreign big boys, he said.
"The challenges facing ASEAN banks are great ... cross-industry mergers and alliances are expected to be a global trend in the industry to capitalise on synergies," he said.
"Strategic reengineering will be a key success factor for banking of the future. We will need to redefine our strategic business focus and in the process find our own markets."
Rozali urged financial institutions within ASEAN to outsource non-core activities to service providers, to reduuce their investment in infrastructure and expertise, and to dramatically improve efficiency.
They must boost transparency and disclosure and leverage on information technology to reshape delivery channels, he added.
ASEAN Bankers Association chairman Rudjito said banks were now gripped by an uncertain global economy and increasing competition.
"The challenges in the new era are great. How we come out will depend on what we do in the next one or two years. One wrong move may mean the end for our institutions," he said.
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