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SINGAPORE : There has been rising concern that Asian banks will not be spared the turmoil sweeping through global financial markets. But analysts have said these fears are unfounded for now.
Asian banks have relatively little exposure to the sub-prime troubles in the United States.
Financial institutions in the region are estimated to account for only 5 per cent of mortgage related write-offs so far.
Deborah Schuler, senior vice president, Financial Institutions Asia, Moody's Singapore, said: "Typically, when we look at the sort of losses so far from the crisis, in Asia, most banks have lost nothing.
"The ones who have been exposed have maybe lost six months' earnings between (the) sub-prime (crisis) last year and financial failures this year; one or two banks have lost a year's earnings, that means they have not touched their capital."
In addition, lenders tend to take on risks of companies they understand.
With the exception of Korea, analysts said most banks in Asia do not require external funding.
Analysts said it appears that Asian banks have stronger balance sheets and a better liquidity position compared to banks in the West. But they are not immune to fear, so it is important to calm nerves and make sure credit does not seize up.
Market watchers expect major central banks to continue taking more aggressive actions to restore confidence. These could be in the form of interest rate cuts or guaranteeing deposits.
And even though the US dollar is retreating, analysts believe Asian banks have measures in place to offset the risks.
David Cohen, director, Asian Economic Forecasting, Action Economics, said: "What would be interesting is to what extent would the regional currencies remain under pressure. That is likely to remain volatile going ahead.
"It could possibly constrain the central banks, as they are likely to be looking towards easing interest rates over the next several months, in the face of a weaker economic outlook and lower inflation that come with a decline in oil prices."
Analysts said the main challenge for Asian banks is likely to be faltering economic growth. With China propping up much of the global economy, a weakening of the Chinese economy will have serious consequences. - CNA/ms
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