Closing the Gap to Boost Asean Resilience Against Novel Risks

| 23 April 2026
Monetary, Op-Eds | Tags: ASEAN+3, Central Banks, Financial Supervision, Macroprudential Policy, Systemic Risks

This op-ed was first published in The Business Times.

The 13th Asean Finance Ministers’ and Central Bank Governors’ Meeting have set the right priorities. Now it is time to deliver.

The Philippines deserves genuine credit for its stewardship of this year’s Asean Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM). Various novel risks and challenges have been discussed – from geoeconomic and geopolitical risks to cross border payments, financial resilience and climate risk management. The full agenda reflects the importance that holistic strategies for sustainable prosperity are key for Asean member states.

The 680 million people of the region are acutely exposed to severe energy price shocks, a looming food crisis due to strong fertiliser import dependence, increasing extreme weather events, rising seas, adverse demographics, and mounting cost of living crises.

Against this background, enabling economic transitions and building resilient economies and financial markets is a key precondition for lasting prosperity.

The 13th AFMGM joint statement reflects the seriousness of the need to act, and the institutional groundwork it documents is real and commendable. The question worth raising now is which essential pieces of the architecture remain missing from the agenda.

Progress in key areas is promising

The statement rightly frames the challenge as one of scale. No government can finance all projects required for resilient infrastructure and communities, the transition to affordable, clean and secure energy, and food security investments through public budgets alone.

Fiscal space across Asean is constrained, and the investment requirements are simply too large. The logical response is to mobilise private capital, and Asean finance ministers and central bank governors are supporting several meaningful moves in that direction.

Dedicated facilities and continued support for existing schemes are important instruments. The Asean Catalytic Green Finance Facility under the Asean Infrastructure Fund (AIF) has built a lending pipeline of 30 regional projects worth US$19.4 billion for 2026 to 2028.

The newly launched Regional Connectivity Fund for Energy in Southeast Asia under the AIF, managed by the Asian Development Bank (ADB), will support project preparation for the development of the Asean Power Grid.

Another proposed ADB facility of US$30 billion through 2030, focused on sustainability, digital transformation and resilience to implement the Asean Community Vision 2045, further broadens the available toolkit. These initiatives represent a serious multilateral commitment.

On the information side, various Asean institutions such as the Asean Capital Market Forum (ACMF) dedicate considerable work to reduce the information costs associated with sustainable investment decisions.

Several guides and support tools have been made available to businesses – to lower the search and verification costs associated with sustainable opportunities.

The ACMF Action Plan 2026-2030 adds further momentum, with initiatives to accelerate capital market financing for the energy transition and to develop innovative instruments to close financing gaps.

Taken together, these are meaningful building blocks.

The missing piece: central banks need to step up

And yet, reading through the joint statement carefully, one notices what is absent.

The role of Asean’s central banks and financial supervisors in the joint effort to mobilise private capital at scale remains implicit. Their contribution is mainly in references to what the ACMF is doing: taxonomy work, disclosure standards, and carbon markets.

Missing from the agenda is a joint commitment to exploring how their own instruments might be better aligned with the shared goals.

This omission matters enormously. Central banks and supervisors are powerful actors, whose instruments affect where capital actually flows. They set the conditions under which banks lend, investors take risks, and projects get financed.

Leaving these instruments on the sidelines of a private capital mobilisation strategy means that core aspects of what eventually determines investment decisions are not considered.

Two central banks and supervisory tools in particular deserve attention within the Asean context. Their effectiveness would be significantly amplified if jointly agreed upon across the region – not least since the economic benefits could trigger virtuous circles at scale, and the systemic risks they are designed to address do not stop at borders.

Targeted refinancing operations and smarter capital buffers

The first tool would support private capital to move towards priority areas at scale. It is what economists call targeted refinancing operations.

In plain terms: Central banks could offer banks cheaper funding for lending to priority areas, such as climate-resilient infrastructure, clean energy, or food security projects. The mechanism is simple: the more a bank lends toward the region’s shared priorities, the lower its own borrowing costs. This directly tackles one of the biggest obstacles to investment in new economic activities: the perception that they are riskier and more expensive than conventional lending, even when the underlying projects are sound.

It also helps address the undervaluation of additional benefits these investments bring to communities, supply chains, and the broader public.

Several central banks within Asean and elsewhere in the world have already experimented with versions of this approach. A joint Asean central bank commitment to introduce such operations – for example supporting the Asean Power Grid – could be pivotal in mobilising private capital at the scale required.

The second tool would reduce the risk of systemic financial stress spilling over across the region and into the real economy, affecting households and small businesses alike. The region faces compound, interconnected risks – a typhoon could disrupt supply chains, straining banks across borders, which will tighten credit supply to local businesses.

Smarter capital buffers, calibrated to account for compound and cascading risks, could make the financial system genuinely more shock-resistant.

Crucially, they could also be designed to reward banks that actively reduce the economy’s overall exposure to those systemic risks, for example with reduced capital requirements for investments into climate resilient infrastructure and low-carbon business models.

A natural next step for Asean

None of this diminishes what has already been built. The suggestion is simply that Asean’s finance track take the next step: examine how central bank and supervisory tools can be brought into alignment with the region’s own stated ambitions.

A joint work programme – assessing targeted refinancing, smarter financial risk buffers, and related instruments – would be a natural and high-value addition to everything already underway.

Singapore holds the chairmanship in 2027, when Asean marks its 60th anniversary. There may be no better occasion to demonstrate that central banks and financial supervisors are ready to take the necessary steps to build resilience and support sustainable prosperity.

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