S'pore banks get top Asian ratings

S'pore banks get top Asian ratings

SINGAPORE (Reuter): Singapore banks have the lowest credit risks in Asia while Chinese and Indian banks have the highest, Standard and Poor's director of financial institutions Ken McLay said yesterday.

The international credit rating agency, which rates countries according to investment and credit risks, saw higher risk in Taiwan, Malaysia, South Korea, Thailand, Indonesia and Philippines.

China and India lead the high risk pack, McLay said.

"For India, the economic risk is a restraining factor as well as the political instability," he said.

In China, there was uncertainty over government policies and regulations as well as a weaker legal system and accounting practices, he said.

Strong regulation and supervision, sound asset quality, profitability and strong professional management were among some of the factors supporting the positive ratings of Singapore banks, McLay said.

"Singapore banks are among the highest rated in the region. They have perceived strong provisions for loans losses and strong levels of hidden reserves," he told a news conference.

Other Asian banks face the potential threat of increased competition as the sector is deregulated and more foreign banks are allowed in.

"Opening to foreign banks could lead to higher competition which they don't need," McLay said.

These banks also suffer from high government interferences, economic risk, weaker legal systems among other inefficiencies.

But all is not that bleak for other Asian banks, McLay said.

"Behind the storm clouds, Asian banks have good fundamentals supporting them," he said. These include strong economic growth, good earnings and franchises as well as conservative balance sheets.

McLay said the increasing expansion by Singapore banks Southeast Asia could potentially weigh on their positive ratings.