S'pore tussles with issue of ringgit-based assets<\/p>\n
SINGAPORE (Dow Jones): Singapore banks -- fresh from converting
\nringgit-denominated deposits to U.S. dollars -- must now grapple
\nwith the asset side of the balance sheet, bank analysts said.<\/p>\n
\"They squared off their ringgit-denominated current and fixed-
\ndeposit accounts. They must now deal with ringgit-based assets,
\nsuch as outstanding loans payable,\" said a banking analyst at a
\nU.S. investment house.<\/p>\n
Banks generally used the depositors' ringgit accounts for
\nloans to customers living in or doing business in Malaysia,
\nanalysts said.<\/p>\n
\"These borrowers may be perfectly within their rights to say
\nthey don't want to convert to U.S. dollars,\" said one banking
\nanalyst, when asked if Singapore banks may unilaterally decide
\nthat ringgit loans must be converted to U.S. dollars, just as the
\ndeposits have been.<\/p>\n
\"The situation may not be dire for Singapore banks, given the
\nstrength of the U.S. dollar and the favorable fixed exchange rate
\nwith the ringgit,\" he said.<\/p>\n
Last week, Bank Negara, Malaysia's central bank, fixed the
\nringgit at 3.80 to the U.S. dollar. But in converting Singapore-
\nbased ringgit deposits, the Association of Banks in Singapore
\nrecommended and banks used 4.00 ringgits to the U.S. dollar.<\/p>\n
\"There is also the positive hope that local lending by
\nsubsidiaries in Malaysia could be offset by local ringgit
\ndeposits,\" said Alastair Macdonald, a Bangkok-based regional bank
\nanalyst with Paribas Asia Equity. \"The problems might come when
\nSingapore banks attempt to repatriate any profits generated by
\nthose loans.\"<\/p>\n
Singapore banks only began announcing regional loan exposures
\nat the end of 1997, making it difficult to chart the trend in
\nregional exposure, although before the crisis domestic companies
\nhad been encouraged by the government to expand regionally.<\/p>\n
But for the first six months of 1998, Singapore's Big Four
\nbanks reported, along with their earnings, their exposure to the
\nfive Asian countries worst hit by the crisis: Malaysia,
\nIndonesia, South Korea, Thailand and the Philippines.<\/p>\n
Net exposure in relations to the banks' total assets was
\nDevelopment Bank of Singapore, 1.4 percent; Oversea-Chinese
\nBanking Corp Ltd., 14.3 percent; United Overseas Banking Corp,
\n7.6 percent; and Overseas Union Bank Ltd, 8.1 percent.<\/p>\n
The Malaysian weighting in these estimates is high, except at
\nDBS, where the bulk of the exposure was to Thailand. OCBC, on the
\nother hand, said its Malaysia exposure comprises 78 percent of
\nits total S$4.65 billion loan exposure to these countries.<\/p>\n
Economists estimate that Singapore banks' loan exposure to
\nMalaysia is about S$18 billion, about 10 percent of their
\naggregate loan portfolio.<\/p>\n
\"The impact on Singapore banks, with regard to loan exposure,
\nisn't yet clear,\" said Chiang Yao Chye, Canadian Imperial Bank of
\nCommerce director and head of Asia Pacific research in Singapore.<\/p>\n
He added that the larger question is how the Malaysian capital
\nand currency controls will effect the economy.<\/p>\n
\"There are restrictions on converting ringgit into foreign
\ncurrency, but it isn't clear if this will stop banks and
\ncorporates from repaying outstanding loans - short of a debt
\nmoratorium,\" said one U.S. bank analyst in Singapore, adding that
\nhe had spoken with a number of Bank Negara officials.<\/p>\n
\"They have an open mind. They want to close the economy, but
\nnot void external contracts, \" he said. \"They want those
\ncontracts cleared so that Malaysia can start from scratch with a
\nclosed economy.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/spore-tussles-with-issue-of-ringgit-based-assets-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}