The global economy continues to navigate an uncertain and uneven path. Emerging challenges to financial stability, including shocks stemming from policy uncertainties in certain advanced economies, geo-economic fragmentation, and trade frictions, have underscored the need for robust global and regional financial safety nets. Against this background, ASEAN+3’s ongoing efforts to strengthen the regional financing arrangement (RFA), notably to explore a “Paid-in Capital” (PIC) structure, have become a cornerstone of regional financial cooperation.
Established as a network of bilateral swap arrangements in 2010, the Chiang Mai Initiative Multilateralisation (CMIM), which is the RFA for the ASEAN+3 region, has provided the region with a cost-effective mechanism for mutual liquidity support. However, experience and analysis have revealed several structural limitations. The swap-based framework can introduce uncertainty in financing, limit the duration and flexibility of crisis support, and pose operational complexities in coordinating multiple transactions among members. Moreover, the absence of a legal entity constrains the RFA’s ability to manage risks, mobilize resources, and enhance credibility during crises.
Transition from contractual arrangement to paid-in capital structure
To address these challenges, ASEAN+3 members have begun in recent years exploring the potential transition of the RFA to a PIC structure—a model that would transform from the CMIM, which is based on a contractual arrangement, into a well-established institution with its own balance sheet and governance framework. Such a shift would allow the RFA to provide timely, credible, and well-governed financial support in response to shocks.
At the ASEAN+3 Finance Ministers and Central Bank Governors’ Meeting (AFMGM+3) in May 2024, members reached a consensus on the potential benefits of a PIC structure and tasked their Deputies, supported by the ASEAN+3 Macroeconomic Research Office (AMRO, the dedicated international organization supporting the RFA to ensure its operational readiness), to narrow down feasible financing models by 2025.
Based on AMRO’s analytical studies, Ministers and Governors agreed that a PIC structure could substantially enhance the RFA’s effectiveness in four key areas:
- Credibility and Effectiveness — Establishing a legal entity with a separate and self-sustained balance sheet would strengthen the RFA’s autonomy, accountability, and ability to deliver predictable financing, strengthening the RFA as a more credible regional safety net.
- Financial Strength and Stability — Pre-committed funds would ensure pooled resources can be mobilized swiftly to respond to liquidity shortages, while reducing uncertainty on members’ discretionary participation during crises.
- Operational Efficiency — Centralized management of resources and programs would streamline financial operations, replacing complex bilateral transactions among members with direct and transparent institutional procedures.
- Robust Risk Management — With sound governance and institutional safeguards, comprehensive frameworks could be developed for credit, liquidity, and operational risk management, shielding members from potential losses and boosting investor confidence.
To shed more light on these potential benefits for developing a PIC structure, AMRO has conducted extensive consultations and jointly developed with members several prototype models in line with global best practices. When identifying the model best suited for the ASEAN+3 context, members have considered four guiding criteria developed by AMRO: capacity to deliver the RFA’s mandate; feasibility in the ASEAN+3 context, especially in terms of minimizing financial burden and ensuring equitable burden-sharing; the potential to realize the benefits of PIC, including a strong legal entity and robust governance; and financial viability, ensuring long-term sustainability and cost-efficiency.
Based on this structured assessment, IMF-type models have emerged as the preferred option. Under this type of model, members contribute paid-in capital in reserve assets, local currencies, or in combination of both, drawing from certain features of the IMF financial operations. The model also ensures financing certainty and robust governance within a self-sustained legal entity. It satisfies all four criteria—offering crisis-resilient financing capacity, equitable burden-sharing, room for reserve recognition, and sound financial sustainability.
Path toward designing an effective PIC structure
As discussion advances from conceptual exploration to practical design, four critical issues merit particular attention to ensure that the future PIC structure meets ASEAN+3’s operational and institutional needs:
Financial Viability – Ensure a sustainable capital base while easing pressure on members’ reserves through flexible contribution mechanisms and prudent income management.
Appropriate Size — Tailor the PIC to a scale that caters to the region’s diverse economic landscape and capacities, balancing financial adequacy with sustainability.
Strong Safeguards and Governance — Develop a centralized governance system with transparent qualification processes, robust risk management, and coherent program monitoring which are crucial for reserve asset recognition.
Institutional and Legal Foundations – The PIC will be managed by a legal entity with its own balance sheet and privileges akin to international financial institutions, ensuring operational certainty and accountability.
The ASEAN+3 RFA’s journey toward a PIC structure reflects a pragmatic, consensus-driven approach to regional financial integration. The focus has evolved from identifying potential benefits to determining how best to implement them through a model tailored to ASEAN+3 realities.
At the May 2025 AFMGM+3, Ministers and Governors endorsed a proposal from its Task Force to concentrate on the IMF-type model and tasked Deputies—with AMRO’s continued technical and analytical support—to address remaining design issues such as governance, reserve recognition, sizing, and contribution currencies.
This continued collaboration symbolizes ASEAN+3’s commitment to regional resilience. With the goal of building a credible, well-governed, and financially viable PIC structure, members are taking steps toward enhancing the RFA’s effectiveness and reinforcing the region’s collective ability to respond decisively to future shocks, and eventually turning a shared vision into a lasting institutional legacy.
