APAC Banking Systems Exposed to High Private Sector Leverage
APAC Banking Systems Exposed to High Private Sector Leverage

APAC Banking Systems Exposed to High Private Sector Leverage

APAC Banking Systems Exposed to High Private Sector Leverage

Moody’s Investors Services says that many banking systems in Asia Pacific are still exposed to elevated levels of private sector leverage, although the build-up of such leverage has slowed.
Moody’s explained on Tuesday that leverage levels are high in many markets in APAC because of the unusually long period of low interest rates in the region, Moodys.com reported.
Specifically, private sector credit as a percentage of GDP rose in 12 of the 14 major Asian systems over the past decade, led by China, Hong Kong, Singapore, South Korea and Vietnam.
“Elevated and rising private leverage represent a negative credit development for the banks, because this situation undermines the resilience of borrowers to economic shocks, and constitutes a structural banking system vulnerability,” says Christine Kuo, a Moody’s senior vice president.
“The banks are not only exposed to direct default risks on their exposures, but also to an economy’s broader adjustments to a debt overhang, including the risk of an economic slowdown and deep asset price corrections,” adds Eugene Tarzimanov, a Moody’s vice president and senior credit officer.”The buildup of these long-term risks contributed to a number of Moody’s bank downgrades in 2016 and 2017.”
Moody’s conclusions are contained in its just-released report, “Banks–Asia-Pacific: Private sector leverage remains a structural challenge for many banking systems,” and is co-authored by Kuo and Tarzimanov.
Moody’s report points out that vulnerabilities exist in the APAC corporate sector, although the current slowdown in debt accumulation in most markets and higher economic growth expectations are both positive.
China and India are the most exposed to high corporate leverage risks, followed by Indonesia, Vietnam, Korea and Hong Kong. This assessment is based on Moody’s analysis of corporate leverage relative to GDP, interest coverage ratios, and capital structures.
Moody’s report covers 14 APAC economies: Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand and Vietnam.


Short URL : https://goo.gl/a3uDa5
  1. https://goo.gl/vRzkWt
  • https://goo.gl/Gvhcgk
  • https://goo.gl/PkPpUv
  • https://goo.gl/Q94SVq
  • https://goo.gl/iKwPME

You can also read ...

While China tries to alleviate its demographic crunch, the aging society means a pension shortfall.
Forget that image of sweatshops making all kinds of cheap...
Russia Economic Recovery Underway
Retail sales in Russia picked up in April, while real wages...
In 2017 banks had total mortgage lending of around $352 billion.
High levels of household debt are the greatest risk to Sweden’...
Greece at Crucial Point
Discussions are heating up over future debt repayments for...
Brazil CB Keeps Rates on Hold
Brazil’s central bank considered cutting interest rates last...
Peru Economy Strengthens
Economic growth in Peru strengthened in the first quarter...
EU Tells Italy to Cut Debt, Warns of Euro Spillover
Italy’s incoming government should aim to cut its heavy public...
Saudi Gov’t Told Not to Boost Spending
The International Monetary Fund urged the Saudi government not...

Add new comment

Read our comment policy before posting your viewpoints