SE Asian recovery depends on banking

SE Asian recovery depends on banking

KUALA LUMPUR (AFP): Southeast Asia's continuing recovery
depends on banking and corporate reforms and there are still
concerns about the ability of policymakers to implement extensive
changes, Standard and Poors said Wednesday.

The region's financial markets also remain vulnerable to
volatile capital movements, the United States ratings agency
said.

Ratings and outlooks on Southeast Asian sovereign credits have
generally improved and should remain on a stronger footing this
year, the agency said.

"The rating outlooks on Malaysia, Thailand and the Philippines
are now stable, largely reflecting improved balance of payment
flows, the progress to date in restructuring financial systems
and structural economic reforms," said Takahira Ogawa, regional
director of sovereign ratings for the agency.

Like many of its neighbors key factors for Malaysia's
sovereign rating this year would be further progress in
restructuring in the banking and corporate sectors.

Ogawa said Indonesia's rating of CreditWatch Negative
reflected concern about political and economic difficulties as
well as the possibility of debt restructuring through the Paris
Club.

Ernest Napier, managing director for Asian financial
institution ratings, told a press briefing the banking system in
Malaysia was now "further along the road to recovery" than in
many other regional countries.

But he said it would still take two to three years at least
before Malaysian financial institutions established a firm
footing.

Napier hailed the move by Malaysia's central bank to push bank
mergers but said this was not a panacea. Banks must still deal
with asset quality problems and a scarcity of capital over the
next two years.

Rob Richards, managing director for Asian corporate ratings,
said the economic upturn was good news but there was no cause for
complacency.

It was "imperative" to improve corporate governance and adopt
a "credit culture" -- in which decisions were based on facts
rather than "relying heavily on relationships and reputations, as
many have done in the past."