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SINGAPORE: Senior bankers in Asia are most concerned about excessive regulation in the region's banks, according to a survey by the Centre for the Study of Financial Innovation and PricewaterhouseCoopers (PWC).
The survey polled 443 bankers, regulators and observers from 49 countries on what they thought were the key risks to the banking industry.
The Asian banking industry was relatively shielded from the global financial crisis in 2008, which affected mainly American and European banks.
However, bankers are concerned that the trend towards more regulation around the world could invariably hit Asian lenders.
"If we look at the performance of Asia banks during the financial crisis, they generally come through the crisis in pretty good shape," said Chris Matten, partner at PWC Financial Services Industry.
"So it will seem a little unfair if there are draconian new regulations imposed to clamp down on those with bad behaviour in other economies," he added.
The key argument is that new regulations on banks in the US and Europe may not apply in the Asian context.
Bankers also say enforcing large increases in capital reserves or equity to asset ratios may result in inflexible business models, which may reduce the willingness of banks to take risks.
Moreover, they say the increased costs and volume of new regulations can impact banks' profitability, forcing them to turn to more risky or lightly-regulated areas.
The survey, nicknamed the "Banking Banana Skin risk poll", also found that bankers were concerned about the high risk attached to macro-economic trends.
They noted that the global economic recovery remains weak and supported only by low interest rates and massive fiscal and monetary stimulus. The fear is that a correction in equity and credit markets may lead to asset bubbles.
"We've seen a lot of liquidity flowing to Asia," said Matten. "There is concern that there are further credit risks still to work their way through the system. I think commercial real estate, particularly in United States but also in a number of European countries, is a major area of concern."
The survey also showed that the risk of low liquidity has fallen, as the global economy recovers. At the height of the financial crisis last year, liquidity risk was top among bankers' concerns.
- CNA/yb
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