Asia Pacific banking systems exhibit stability

Twelve of Asia Pacific’s banking systems were given improved stable outlooks by Moody’s Investors Service.

On the other hand, four banking systems did not show improvement from their negative outlooks.

The systems that now improved from negative to stable outlooks are Australia, China, Hong Kong, Indonesia, India, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan and Thailand. Those that still have negative outlooks are Cambodia, Japan, Mongolia, and Vietnam.

"Three factors underpin the generally better outlooks across most of Asia's banking systems, and they are improving local economic prospects and stabilising global conditions; and improving access to international debt and money markets," said Deborah Schuler, a Moody's Senior Vice President.

"The third factor is a continued adequate level of resilience to cope with remaining macro- and micro-economic risks, with the banking systems having suffered only limited damage during the past 30 months of the financial crisis," Schuler added.

Schuler was speaking on the release of Moody's latest update on the outlooks for Asia Pacific's banking systems.

"The Asian banking systems which continue to carry negative industry outlooks are also exhibiting some signs of stability, but remain more vulnerable to shocks," said Schuler. "Typically, these systems were weaker going into the crisis, may have suffered more during the crisis, and/or operate in economies experiencing slower recoveries."

Of the region's advanced economies, only Japan still has a negative outlook, where -- despite continuing improvements in fundamentals over 2009 -- the operating environment remains characterised by the onset of deflation; very weak credit growth and employment figures; still volatile equities market; and limited growth opportunities inside its domestic markets.

By contrast, in Australia, the banking system outlook has returned to stable as industry conditions are stabilising on the back of an economic outlook far more favorable than predicted only six months ago.

And with the emerging economies, the outlook for the Chinese banking system is stable as the country's economy is back to high growth -- due to active government support -- and which is factored into Moody's 12-18 month rating horizon.