The
banking systems in the region are now in better placed
to weather possible stresses similar to the financial
crisis that hit Asia in 1997, says a new report from Standard
& Poor's Ratings Services.
According
to the report, Asia 1997Retrospective: Repeat Of 1997
Crisis Unlikely, But High Leverage A Worry, key factors
that set the scene for the crisis are no longer as prevalent
now as they were in 1997.
"Unlike
the situation in 1997, Asian companies now have lower
foreign currency debt exposure or hedging policies against
foreign exchange risk, and sovereigns have bolstered their
external positions with stronger reserves," said
Standard & Poor's credit analyst Terry Chan.
"Nevertheless,
the overall increase in the debt of sovereigns and, to
a lesser extent, corporates remains a concern," Chan
adds.
The
report examines nine systemic risk factors in 2005, including
banking system structures, government debt and international
reserves, and offers a comparison with the situation in
1996. The study covers 10 Asian financial systems
China, Hong Kong, Indonesia, India, Korea, Malaysia, the
Philippines, Singapore, Taiwan, and Thailand.
Asia's
banking systems have strengthened since 1997, although
some have yet to regain their full pre-crisis credit strength,
says the second of the three reports, titled, Asia
1997 Retrospective: Today's Banks Likely To Survive Stress
Scenarios.
According
to Standard & Poor's credit analyst Adrian Chee, "There
is more governance, improved asset quality, and some consolidation
in Asia's banking systems, and these are now better equipped
to withstand potential crises."
"Nevertheless,
our stress testing indicates that systems with low interest
rates, significant net exports to GDP and high exposure
to an Avian flu outbreak, are the most vulnerable to sharp
rises in non performing assets in times of crises,"
adds Chee.
The
third report, Credit FAQ: Asia 1997Retrospective discusses
the drivers behind the 1997crisis.
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