Title page 1

Contents 10

Acknowledgments 8

Chapter 1. Emerging Challenges in Banking in Asia and the Pacific: Crises, Innovation, Inclusion, and Resilience for a Sustainable Future 13

Abstract 13

1.1. Context and Motivation 13

1.2. Significance of the Book 16

1.3. Organization of the Book 16

Chapter 2. Ready for the Next Financial Crisis? Strengthening Financial Governance Mechanisms 21

Abstract 21

2.1. Introduction 22

2.2. The Asian and Global Financial Crises 23

2.3. National Financial Governance 25

2.3.1. Thailand's Crisis Management 25

2.3.2. Comparative Insights 27

2.4. Regional Financial Governance 30

2.4.1. Evolution of ASEAN+3 Mechanisms 31

2.4.2. Complementary Institutions and Forums 32

2.5. Global Financial Governance 35

2.5.1. The G20-Led Financial Stability Board 35

2.5.2. Reform of Bretton Woods Institutions 37

2.5.3. Emergence of BRICS-Led Mechanisms 38

2.6. Discussion and Conclusion 41

References 44

Chapter 3. The Future of Digital Financial Inclusion in Brunei Darussalam 53

Abstract 53

3.1. Introduction 53

3.2. Theoretical Considerations 54

3.2.1. Financial Inclusion 54

3.2.2. The Role of Technology in Financial Inclusion 56

3.2.3. Traditional Financial Inclusion and Technology Adoption in Brunei Darussalam 57

3.3. The Financial Technology Landscape in Brunei Darussalam 59

3.3.1. Digital Finance Policies and Regulation in Brunei Darussalam 59

3.3.2. The Current State of Digital Finance in Brunei Darussalam 61

3.3.3. Risks of, and Barriers to, Adoption 64

3.4. Future Scenarios and Drivers of Change 65

3.4.1. Conditional Correlations 65

3.4.2. Futures Scenario 68

3.4.3. Descriptive Analysis 69

3.4.4. Drivers of Change 77

3.5. Conclusion and Recommendations 80

References 81

Chapter 4. Financial Inclusion, Fintech, and Banking Stability in Asia and Pacific Economies 84

Abstract 84

4.1. Introduction 84

4.2. Data and Methodology 87

4.2.1. Data and Variables 87

4.2.2. Empirical Framework 91

4.3. Results 91

4.3.1. Determinants of Financial Stability 91

4.3.2. FinTech, Financial Access, and Financial Stability 94

4.3.3. Robustness Analysis on Financial Inclusion, FinTech, and Banking Stability 96

4.3.4. Study of Channels Through Which FinTech and Financial Inclusion Affect Bank Stability in Asia 100

4.4. Conclusions and Discussion 102

Appendix: Cross-Correlation Matrix with Significance Levels 103

References 105

Chapter 5. Financial Inclusion and Policy Shocks: An Application of Topic Modeling on Central Banks' SDG-Driven Policy Predilection for Asia... 108

Abstract 108

5.1. Introduction 109

5.1.1. Research Contribution 110

5.2. Brief Literature Review 111

5.3. Data and Variables 114

5.4. Empirical Strategy 115

5.4.1. Base Model: Fixed-Effect Panel Regression Strategy 117

5.4.2. Instrumental Variable (IV) Panel Regression Technique 119

5.4.3. Dynamic Panel Regression Strategy 120

5.4.4. NLP and Topic Modeling 121

5.5. Results 122

5.5.1. FI Factors and Sectoral SDGs 123

5.5.2. Policy Shocks as Accelerating Force 123

5.5.3. Central Banks' SDG Focus 141

5.6. Discussion 146

5.7. Conclusion 147

References 148

Chapter 6. Central Bank Digital Currency and the Multidimensional Bank Stability Index: Does Monetary Policy Play a Moderating Role? 154

Abstract 154

6.1. Introduction 155

6.2. Literature Review and Hypothesis Development 158

6.3. Data and Variable Construction 161

6.3.1. Sample Selection 161

6.3.2. Construction of Indices (CBDC Adoption Index (CBDCI) and Bank Stability Index (BSI)) 162

6.3.3. Variable Description 163

6.3.4. Preliminary Analysis 165

6.4. Model Specification and Results 167

6.4.1. Econometric Model Specification 167

6.4.2. Results 169

6.4.3. Robustness Testing 171

6.5. Conclusion 174

6.6. Policy Discussion and Limitations of the Study 176

Appendix A 177

References 178

Chapter 7. Monetary Policy, Prudential Regulations, and Domestic Credit: The Role of Commercial Banks in Pakistan 183

Abstract 183

7.1. Introduction 183

7.2. The Importance of Credit from Commercial Banks 185

7.3. Mechanism and Instruments of Prudential Regulations 186

7.4. Methodology to Capture the Impacts of Prudential Regulations 191

7.5. Results and Empirical Findings 201

7.6. Policy Implications and Limitations 207

References 208

Chapter 8. Banking for Resilient and Sustainable Growth in Asia and the Pacific 211

Abstract 211

8.1. Background 211

8.2. Emerging Challenges in the Banking Landscape in Asia 213

8.2.1. Macroeconomic Volatility and Crisis Risks 213

8.2.2. Digital Disruption and Cybersecurity 214

8.2.3. Financial Inclusion Gaps 217

8.2.4. Climate and Sustainability Pressures 220

8.2.5. Regulatory Complexity 221

8.3. Strategic Imperatives for Prosperity and Quality Growth 223

8.4. Call to Action for Stakeholders 224

8.4.1. For Governments and Central Banks 224

8.4.2. For Financial Regulators 225

8.4.3. For Private and Non-bank Financial Sector and Development Partners 225

References 226

Index 228

Table 2.1. Key strategies for managing the Asian financial crisis 29

Table 2.2. Milestones of the Chiang Mai Initiative Multilateralization 33

Table 2.3. Functions of regional financial institutions and economic forum 35

Table 2.4. The multilateral development of financial governance mechanisms 40

Table 2.5. Recommendations to strengthen financial governance 42

Table 3.1. Selected indicators of financial access and development-cross comparison 2021 57

Table 3.2. Traditional financial access indicators in Brunei Darussalam (2023) 58

Table 3.3. Selected indicators of economic development and ICT sector-cross comparison 2021 59

Table 3.4. Summary of digital financial products 63

Table 3.5. Drivers of change 78

Table 4.1. Principal component analysis (PCA) summary for financial access and FinTech indicators 88

Table 4.2. Asia and Pacific economies financial inclusion summary with adjusted rankings 90

Table 4.3. Summary statistics of main variables 92

Table 4.4. Fixed-effects regression results for bank stability 93

Table 4.5. Financial technology, financial inclusion, and banking stability 94

Table 4.6. The relative standard deviation of the ratio of private credit of deposit money banks to GDP as an alternative measure of banking stability 97

Table 4.7. First-stage and second-stage results 99

Table 4.8. First-stage and second-stage results 100

Table 4.9. Channels through which financial inclusion and FinTech influence financial stability 101

Table 5.1. Summary of variables 116

Table 5.2. Fixed-effect regression results-Financial inclusion and sustainable economic outcome 124

Table 5.3. Instrumental variable regression-Financial inclusion and sustainable economic outcome 126

Table 5.4. Regression results-Millennium development goals (mdg) as policy shock 129

Table 5.5. Regression results-Sustainable development goals (SDG) as policy shock 131

Table 5.6. Regression results-Asian financial crisis (AFC) as policy shock 133

Table 5.7. Regression results-Global financial crisis (GFC) as policy shock 135

Table 5.8. Regression results-GMM estimation with policy shock (MDG) 137

Table 5.9. Regression results-GMM estimation with policy shock (AFC) 139

Table 5.10. Causality treatment effects-Predicted by bank branches 141

Table 5.11. Causality treatment effects-Predicted by depositors 142

Table 5.12. Results of principal component analysis (PCA) 145

Table 6.1. Dimensions and their Indicators for BSI 164

Table 6.2. Definition of variables 165

Table 6.3. Summary statistics 166

Table 6.4. Correlation coefficients 168

Table 6.5. Baseline regression results 170

Table 6.6. Various model specifications 173

Table 6.7. Impact of CBDC adoption on small, medium, and large banks 174

Table 6.8. Z-score as a proxy for bank stability 175

Table 7.1. Domestic credit in South Asian countries (% of GDP, unless specified) 187

Table 7.2. Net change in broad money (M2) (PKR billion) 188

Table 7.3. Causative factors associated with broad money (M2) (PKR billion) 188

Table 7.4. Credit to the private sector by commercial banks 190

Table 7.5. List of banks 194

Table 7.6. Componential breakdown of business variables (averages in PKR billion) 195

Table 7.7. List of variables 196

Table 7.8. Descriptive statistics 196

Table 7.9. Correlation matrix 197

Table 7.10. Dependent variable: Ln (ADVNC) 198

Table 7.11. Dependent variable: Ln (INVST) 200

Table 7.12. Dependent variable: Ln (DPSTS) 202

Table 7.13. Dependent variable: Ln (LQDTY) 204

Table 7.14. Dependent variable: ROA 206

Boxes 216

Box 8.1. CBDC design choices: Stability implications 216

Box 8.2. From access to usage: Why digital financial inclusion still falls short 218

Box 8.3. Digital public infrastructure (DPI): What works in small, high-income economies 219

Chapter 4. Financial Inclusion, Fintech, and Banking Stability in Asia and Pacific Economies 104

Table A1. Cross-correlation matrix with significance levels 104

Chapter 6. Central Bank Digital Currency and the Multidimensional Bank Stability Index: Does Monetary Policy Play a Moderating Role? 178

Table A1. Sensitivity analysis for BSI by varying lower-bound restrictions on weights 178