More than 3% of S'pore loans to Asia default
More than 3% of S'pore loans to Asia default
SINGAPORE (Agencies): Some 3.2 percent of loans totaling S$41 billion (US$24.1 billion) lent by Singapore banks to customers in the Asian region have turned bad, Deputy Prime Minister Lee Hsien Loong said yesterday.
He said the so-called "classified loans" -- comprising doubtful and uncollectable loans -- to the region amounted to S$1.2 billion as of November 1997.
Lee told parliament that although the percentage of classified loans could rise amid regional financial turmoil, it would not spark a banking crisis here because of strong fundamentals shielding local banks.
Lee said the Monetary Authority of Singapore (MAS), the de facto central bank, was "monitoring the situation closely" even though specific provisions for such loans had already made by the local banks.
Concern over Singapore banks' exposure to the region, especially Indonesia, was one of the key factors which resulted in the recent sell-down in banking stocks.
Two months ago, MAS said that Singapore banks' non-performing loans made up less than three percent of their total loans given out in Singapore and worldwide.
Lee said it was a folly to conclude that local banks and companies should stop expanding into the region as a result of the regional financial crisis.
In order to be regional players, size would be a prerequisite, said Lee, who took over this month as MAS chairman from Finance Minister Richard Hu.
"Size means you can do bigger deals and weather bigger upsets in your individual investments and critical mass to build up your expertise," Lee said.
He said Malaysia had the biggest share -- 12 percent -- of Singapore banks' loans to the region at $28 billion, followed by Indonesia with $5.5 billion and Thailand with $5.1 billion, he said.
South Korea took $2.7 billion in loans from the Singapore banks while the Philippines received $700 million, he said.
Indonesia
In a related development, Singapore Finance Minister Richard Hu said yesterday he did not expect Indonesia to default on its loans.
He told parliament Indonesia, which is in a deep economic crisis, had never defaulted on a loan and Singapore did not expect it to now.
"We do not expect Indonesia to default on the loans," he said.
Singapore promised US$5.0 billion as part of a $43 billion rescue package for Indonesia put together by the International Monetary Fund (IMF).
"This is a sovereign loan and we do not need any securities," Hu said.
"As previously stated, it is the second line of defense. No funds have been dispersed," he said of Singapore's promised loan.
He said Indonesia would have five years to repay any draw downs it made on the Singapore loan.