Copyright © 2018 Authors. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. International Journal of Engineering & Technology, 7 (4.38) (2018) 805-809 International Journal of Engineering & Technology Website: www.sciencepubco.com/index.php/IJET Research paper Does Financial Sector Development facilitate in the ASEAN Economic Community’s Financial Integration? Liberty S. Patiu RVR-COB Financial Management Department De La Salle University, Taft Manila Abstract The development of the financial services industry is crucial to the harmonious financial integration in East Asia. The ASEAN region is a host of member states with different levels of financial and economic developments. This study determines the level of development in the financial services sector among the ASEAN5 member states from 2002 to 2013 and explores the opportunities where financial inte- gration may be undertaken in the light of the establishment of the ASEAN Economic Community in 2015. Member states exhibited high economic growth levels since the Asian Financial Crisis, which was spurred by the heightened competitiveness in the region brought about by the increase in inter- and intra-regional trade, investments and production network. It was found that there is high intermedia- tion in the financial system and majority of the ASEAN5 Member States still employ the bank-based financial system compared to non- banks and financial markets. The region will slowly shifts from bank-based to market-based system, as changes in the financial architec- ture will become increasingly evident in the near future to enable smooth transition of the region into an economically integrated region. Financial supervisors are faced with the challenges of providing sound financial environment, strong supervisory/regulatory framework and better institutional arrangements to stimulate further development of the financial services industry. Advanced economies will lead the region in increasing depth, in promoting financial soundness and in deepening collaboration among member states where reform priorities and financial convergence are crucial. Keywords: Financial Sector, Banks, Financial Development, Financial Integration, ASEAN Economic Community. ASEAN5 Member States 1. Introduction The advent of globalization led countries to liberalize their financial system to provide level playing field in the provision of financial services. In Southeast Asia, levels of recovery measures, prudential regulations and institutional infrastructures were undertaken to make the financial system competitive. Financial development encompasses financial regulation and super- vision, measurement of financial openness, and other measures of developments. It also involves the widening and deepening of the financial system. This is evident from the increase in the number of financial institutions, increase in the level of intermediation, the efficiency of its institutional underpinnings, and access to the finan- cial services by the people. To date, there is a growing number of studies that focus on financial development, especially those that are linked to economic growth. A country requires complex and efficient financial services to en- hance and maintain a sound financial system. Wadud 1 evaluated the long-run relationship between financial development and growth and found causality existing between them where financial devel- opment facilitated in the growth of the country’s economy. In Vietnam, Anwar and Nguyen 2 evaluated their linkage and found a positive effect of credit to GPP and economic growth and a nega- tive effect of the stock of foreign direct investment on economic growth. In fact, Estrada, Park and Ramayandi 3 examined the im- portant role of financial development to the medium and long-term growth of the region. It is surprising that Delke and Pundit 4 found convergence by the financial systems in lower- to middle-income economies with those in advanced economies. They recognized the role of finan- cial markets in increasing foreign direct investment in the country and in developing the financial system. This study aims to examine the current state of the financial sector development. This study will serve as a guide in evaluating the readiness of the ASEAN region, particularly the original Member States (ASEAN-5) in implementing an Integrated Financial Sys- tem under the ASEAN Economic Community. 2. Research methodology Descriptive research design was be used in the study as it presents the stylized fact of the financial sector development, particularly banks using aggregate country data gathered from the financial development database of the World Economic Forum and World Bank. It presents the stylized facts on the level of financial development among ASEAN-5 countries and evaluates how the financial de- velopment indicators can facilitate in the liberalization and inte- gration of the financial system under the ASEAN Economic Community. For most of the analysis, most indicators were be assessed as a ratio of gross domestic product (GDP to facilitate benchmarking of the state of financial development in each coun- try. The original five (5) member states of the ASEAN countries, namely, Indonesia, Malaysia, Singapore, Thailand and the Philip- pines are used in the study, as the other five members have under-