The economic rise of Asia has been much noted. But many have not realized that this is not just a story about the emerging giants, India and China. Countries that are a part of the Association of Southeast Asian Nations (ASEAN) are also an important contributor to Asia’s growth.¹ By 2009, this region already accounted for 9 percent of Asian wholesale banking revenues and 13 percent of capital markets and investment-banking (CMIB) revenues. To be sure, these are not dominant positions. But several key ASEAN economies will grow faster than the rest of Asia over the next five years. GDP growth in Vietnam (7 percent), Indonesia (6 percent), and Malaysia (5 percent) will be notably faster than in the established markets of Japan (2 percent) and Australia (3 percent).²

Several forces are propelling ASEAN growth. Chief among these are the need for new roads, ports, and power plants, and governments’ determination to expand capital markets. Evidence of both was seen in the announcement at the July 2010 ASEAN summit in Hanoi of a plan for road and rail development across the region. ASEAN’s brightening star will likely attract yet more investment from global banking majors, many of which have already built formidable presences across the region. For local banks, an inflection point is at hand. As Asian companies expand into new regions and the largest go global, incumbent banks will need to redouble their efforts or risk losing a substantial share of their investment-banking franchise to the big international banks. We see five core capabilities that local banks must build, including the coverage model, account planning, research, cross-border capabilities, and the talent proposition.