Governing Finance for Sustainable Prosperity in ASEAN

This policy brief builds on the discussions held during a roundtable on “Governing Finance for Sustainable Prosperity in ASEAN” convened by the ASEAN+3 Macroeconomic Research Office (AMRO), the Council on Economic Policies (CEP) and the South East Asian Central Banks (SEACEN) Research and Training Centre in March 2026.

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ASEAN financial authorities face an era of compounding, novel risks, which also come with opportunities for structural transformations. Welfare and economic growth in the region increasingly depend on the capacity to manage long-term structural change – from the cost-of-living crisis and more frequent extreme weather events to the digitalisation of finance, population ageing, climate transitions, and accelerating technological change. These forces interact and amplify one another.

This policy brief argues that governing finance for sustainable prosperity requires four inter-related shifts:

• Embedding longer-term structural priorities into macroeconomic and financial governance frameworks;
• Modernising monetary policy tools to maintain effectiveness in a complex transmission environment;
• Operationalising financial resilience at micro, systemic, and macro levels while preserving space for productive risk-taking;
• Building a coordinated, interoperable regional architecture for the governance of digital money and cross-border payments.

In each area, the following steps could be taken to align governing finance with sustainable prosperity:

Governing Finance in Times of Structural Transformations

• Integrate compound risk and structural changes into monetary and supervisory analysis and instruments.
• Define resilience of what, to what, for whom, measured how, and governed by whom, to ensure policies are targeted to the specific needs of structural changes and novel risks.
• Integrate crisis prevention incentives and guardrails in financial regulation and monetary policy instruments to keep the risks as manageable as possible.
• Move from rules-based to outcome-based supervisory and monetary frameworks, where appropriate, which allows learning by doing and innovation to address novel developments.
• Move towards adaptive approaches that are anticipatory and integrate buffers for uncertainties instead of relying on perfect knowledge, where this knowledge is not available.
• Develop sandbox environments to foster innovation and learning and ensure a steady flow of information and experience exchange with national stakeholders, including the private sector and other societal organisations.
• Ensure effective monetary-supervisory-fiscal coordination to support a coordinated introduction of effective crisis prevention policies and ensure that each institution has effective instruments available to be used for crisis resolution.
• Assess how shrinking fiscal space affects the effectiveness of monetary policy and supervisory regulation to ensure long term economic welfare, societal protection, crisis prevention and management remain effective.

Monetary Policy for Sustainable Prosperity

• Adjust monetary policy modelling approaches to reflect structural change and non-linear risk scenarios, moving beyond point forecasts and equilibrium assumptions towards adaptive scenarios that account for compounding shocks and narrowing fiscal space.
• Differentiate inflation management responses to target demand-driven and supply-driven inflation sources with policy responses calibrated to the actual nature of inflationary pressures.
• Ensure that monetary reaction functions are adapted to a higher-uncertainty environment, providing guidance on tolerance ranges that keep inflation expectations anchored without constraining the policy flexibility needed to respond to structural pressures.
• Integrate the impacts of digital finance in monetary policy making, including the effects of digital payment adoption on monetary velocity, the implications of credit growth by non-bank financial intermediaries on interest rate pass-through, and the systemic relevance of stablecoins and digital asset markets on aggregate monetary conditions.
• Review and adjust collateral frameworks and monetary policy instruments to remove structural bias in favour of activities that increase systemic risk or hinder productive economic transitions, and improve provisions for activities supporting economic resilience and long-term productivity growth.
• Assess the interaction between sustained higher interest rate environments and the availability and affordability of transition and infrastructure finance. Develop complementary instruments and targeted adjustments where monetary conditions risk constraining investment critical to sustained economic welfare.
• Adjust asset purchase policies, collateral eligibility frameworks, and reserve requirements or remuneration to incentivize for financial institutions to support structural economic transitions. Develop carefully scoped pilot programmes in coordination with supervisory authorities to generate the empirical basis for broader implementation.

Financial Supervision for Building Resilience

• Operationalise financial system resilience by specifying which functions must be maintained, against which shocks, for which segments of the economy, and under whose governance, so that it becomes a measurable supervisory objective.
• Extend the supervisory perimeter to cover non-bank financial intermediaries and digital finance platforms, ensuring that resilience requirements keep pace with the actual structure of financial intermediation.
• Ensure that risk management expectations for novel risks are effectively implemented and comprehensively integrated into the full supervisory toolbox, including supervisory dialogues, additional capital requirements, and, as a last resort, penalty payments.
• Complement conventional capital adequacy and liquidity frameworks with additional information sources and scenario-based approaches that use estimate ranges rather than point estimates and apply explicit margins of conservatism for novel risk categories where historical data provides an insufficient basis for risk quantification.
• Introduce differentiated prudential requirements that distinguish between risk exposures threatening systemic stability and those associated with productive risk-taking in economically important transition sectors, ensuring that aggregate capital buffers remain sufficient to absorb shocks.
• Adopt proportionality principles and complement them with targeted risk-sharing mechanisms to ensure that supervisory standards do not disproportionately constrain credit access for underserved segments.
• Broaden novel risks skillsets within supervisory institutions and establish structured knowledge exchange with financial institutions and international peers recognising that the quality of human judgement is key to govern novel risks and structural changes.
• Establish sandbox and pilot environments for adjusted prudential tools, generating evidence on their effectiveness before broader mandatory implementation and ensure lessons are systematically integrated into the overall supervisory framework.

Governing the Digitalisation of Money and Finance

• Establish a trusted relationship of central banks and financial regulators with institutions involved in advancing the digitalisation of money and finance. Foster a mutual understanding that a stable system needs to be regulated and at the same time adaptive to evolving technological advances, and work with regulatory sandbox approaches for innovations.
• Develop a regional cross-border digital payment governance framework that establishes commonly standards, liability schemes, dispute settlement mechanisms, liquidity shortage provisions, and further prerequisites for safe and inclusive cross-border payment integration.
• Establish regulatory frameworks for stablecoins, both within and across ASEAN jurisdictions. Assess the systemic implications of USD-denominated stablecoins as a de facto anchor for regional cross-border digital payments, including the risks a USD stablecoin anchor poses to monetary sovereignty, currency substitution and capital-flow volatility across ASEAN+3 economies. Assess the scope for regional-currency and multi-currency stablecoin and settlement arrangements.
• Extend the supervisory perimeter to FinTech entities, including their links to other financial institutions, ensuring that these connections are subject to group-wide risk assessment and do not become hidden channels of financial instability.
• Implement CBDC pilot programmes with a dedicated learning framework and enable ASEAN central banks at different stages of readiness to share empirical evidence. Develop compatible design principles that preserve monetary sovereignty while supporting regional payment interoperability.
• Develop interoperability standards for national digital payment systems that support future regional integration, ensuring that the likely near-term national approaches do not foreclose the option for deeper cross-border connectivity as governance frameworks mature.
• Take a strong stance against criminal activities associated with digital payments and FinTech, expanding the regulatory perimeter to detecting fraud and illegal activities, and holding providers responsible for implementing sound AML/CFT practices.