Asia's banks fail to tackle bad debt, may hurt growth<\/p>\n
Dow Jones, Tokyo<\/p>\n
Asia's failure to tackle bad debts has enfeebled its national
\nbanking systems and risks depressing growth for years, according
\nto the professional services firm Ernst & Young LLP, the
\nFinancial Times reported in its Thursday overseas edition.<\/p>\n
Bad loans total US$2.0 trillion across the region and in
\nIndonesia's case are estimated at 60 percent of total bank loans,
\nthe firm says in a forthcoming report.<\/p>\n
The document says that instead of taking the opportunities to
\nimprove their banking systems after the Asian financial crisis,
\nmany countries backed away from the painful process of ridding
\nbanks of non-performing loans (NPLs), the FT reported.<\/p>\n
\"Asia faces an even bigger challenge in dealing with its NPL
\ncrisis,\" said Jack Rodman, managing director of Ernst & Young's
\nAsia Pacific Financial Solutions.<\/p>\n
\"A global economic slowdown, government hesitancy and
\ninconsistency in dealing with the NPL problem, lender
\nintransigence and other issues have caused the region's NPL
\nvolume to jump to an estimated $2 trillion.\"<\/p>\n
As well as failing to deal with the problem of bad debts,
\nAsian governments routinely underestimate the volume of NPLs in
\ntheir banking systems - sometimes by a considerable margin,
\naccording to Ernst & Young estimates.<\/p>\n
Indonesia's central bank says NPLs in its banking system are
\n18.5 percent but Ernst & Young estimates the figure to be 60
\npercent.<\/p>\n
China reports NPLs at 28 percent but a more accurate estimate
\nis 40 percent, Ernst & Young says.<\/p>\n
Even in Japan, where NPLs are 26 percent of total gross
\ndomestic product, bad loans are estimated at 27 percent of total
\nloans against a reported 11.5 percent, the newspaper reported.<\/p>\n
The cost of continued failure to deal with the problem will be
\nhuge, Rodman said, including, \"a much slower rate of GDP growth,
\nor no growth, lower standards of living, less demand for products
\nand services, reduced business investment and less tax revenue
\nfor governments.\"<\/p>",
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