Asia Pacific banking system outlook broadly stable, says Moody’s
SINGAPORE (Bernama) – Moody’s Investors Service says that the broad credit outlook for banks in the Asia Pacific region in 2013 is stable.
This is on the expectation that they will remain largely insulated from the negative credit pressures affecting their peers in many Western economies, says Moody’s.
Managing Director for Moody’s Financial Institutions Group in Asia Pacific, Stephen Long, said: “We consider that this stable outlook is driven mainly by the region’seconomic resilience, its relatively accommodative monetary policy, and the banks’ own strong liquidity when compared to global norms, as well as their relatively robust capital buffers.”
Long was speaking on the release of Moody’s “Asia Pacific Banking Outlook 2013”, which examines the trends for 14 banking systems in the region.
On an individual basis, 11 show stable outlooks, while the Philippines exhibits a positive outlook, and India and Vietnam negative outlooks.
“For the region, in terms of specifics, we consider that the economic recovery from the troughs reached in mid-2012 will continue in much of the region in 2013.
“At the same time, interest rates will remain low, making an asset quality shock unlikely during this year in most Asian countries. “In addition with liquidity, the vast majority of Asian banks are ready to adopt Basel III capital standards, which are being implemented in much of the region in 2013, even though some Asian regulators have announced delays,” said Long.
The report further examines six key themes for banks in Asia in 2013.
These include the expectation that the modest cyclical deterioration apparent in asset quality should fade by mid-year, the consideration that the region’s very low interest rates – while providing further reassurance that an asset quality shock is unlikely – are also creating longer-term risks.
Another theme is the expectation that although Chinese banks will avoid a hard landing, longer-term issues remain unresolved. In addition, the report argues that Asian banks are well-placed to meet the capital standards of Basel III, and the banks will carry on with their overseas expansion, though at a more moderate pace than in 2012.
The report said while the region’s regulators will focus on ensuring that new-generation capital instruments meet Basel III requirements, they will still refrain from seeing any urgency in pressing ahead with broader resolution tools that could impose losses on creditors.
The report said that with the Chinese banks, the risks of a systemic crisis materialising in 2013 are low.
And while loans to real estate developers and to local government financing vehicles (LGFV) will remain sources of long-term asset quality concerns, Moody’s sees the risks of significant distress in 2013 as contained, respectively by a recovering real estate sector and the Chinese government’s active management of the LGFV refinancing process.
With Japan, the credit conditions for its banks will remain stable despite a generally weak economic outlook.
The major banks will continue to take advantage of their relatively strong financial profiles and the retreat of European banks by expanding overseas, both in terms of their loan books and in terms of strategic investments.