Standard and Poor's sees signs of strain in financial systems
Standard and Poor's sees signs of strain in financial systems
HONG KONG (AFP): Global credit rating agency Standard and
Poor's warned Tuesday of weaknesses in the financial systems of
16 economies, with up to 70 percent of China's assets at risk.
The New York-based credit assessor included seven Asian
economies -- China, Hong Kong, Japan, Malaysia, the Philippines,
Singapore and Taiwan -- among the 16 which revealed signs of
deteriorating credit quality.
The others were Chile, the Czech Republic, Egypt, Greece,
Israel, Lebanon, Panama, the Slovak Republic and the United
States.
In a report received here, Standard and Poor's said excessive
credit growth, weakening external funding profiles and deflating,
or soon to be deflating, asset prices were a concern in all 16
economies.
In Japan, Standard and Poor's estimated problem assets could
amount to about 20 percent of the total, higher than its previous
estimate of 15 percent.
The upward revision reflects the depth of the country's
recession, the report said, adding the costs of recapitalizing
the teetering financial system could amount to 10 to 15 percent
of Gross Domestic Product.
The agency said increased competition in Japan's financial
sector as a result of its "Big Bang" financial reforms will put
further pressure on the Japanese banking system.
Hong Kong's banks are well managed and the territory has a
"solid regulatory environment," but S and P said the system could
still come under severe pressure if the local currency's link to
the U.S. dollar is broken.
The report said Hong Kong's credit growth has been high and it
is now faced with increasing exposure to declining property and
stock markets which have slumped drastically in the past year.
Standard and Poor's last month downgraded Hong Kong's
sovereign credit rating due to the deepening recession and in
part to the government's decision to intervene heavily in the
markets to stamp out speculation against the local dollar.
The agency also revised upwards its forecasts for gross
problematic assets in South Korea, Thailand, Indonesia and
Malaysia due to the prolonged nature of the financial crisis.
It said the Malaysian government's recent decision to impose
strict capital controls on the ringgit and reluctance to open the
financial sector to foreign controlling stakes will greatly delay
a recovery.
Standard and Poor's predicted problem loans could hit 40
percent as falling asset prices and the slowing economy left the
highly leveraged Malaysian corporate sector exposed.