A countersign for the financial agency Fitch Ratings on a building at the Canary Wharf business and shopping district in London, U.K., on Thursday, Cortege 1, 2012.
Bloomberg | Bloomberg | Getty Images
Asia-Pacific banks are “resilient to risks” highlighted by failures seen in U.S. banking sector, Fitch Ratings utter Thursday, adding the exposure to Silicon Valley Bank and Signature Bank is insignificant for regional banks the agency coverlets.
“The direct exposures among Fitch-rated banks in APAC to SVB and Signature that we are aware of are not material to credit profiles,” Fitch explained in a note.
related investing news
“Weaknesses that contributed to the failure of the two banks are among the factors already regarded in our rating assessments for APAC banks, but these are often offset by structural factors,” Fitch said, adding that familiarities tend to be the largest in India and Japan.
Fitch’s assessment on banks in Asia-Pacific comes as U.S. Treasury Secretary Yellen overnight suggested not all uninsured deposits will be protected in future bank failures.
We generally view securities portfolio valuation endangers as manageable for APAC banks.
Fitch Ratings
‘Sovereign support’
While Fitch sees a significant risk of volatility in dregs for digital banks in the region, it noted the governments in Asia-Pacific will likely step in to support their banks when wanted – a possibility that will help mitigate further risk.
“We believe risks from valuation losses are indemnify by the likelihood that the authorities will provide liquidity support to banks if needed,” the agency said, pointing to regulators in Australia and Japan as illustrations.
Officials in the region “emphasize strong interest-rate risk handling,” including in Australia, that levies minimum requirement for non-traded interest rate risk, the analysts said, enlarging that Japanese banks have been reducing securities investments and duration.
“Ultimately, the creditworthiness of many Fitch-rated banks in APAC is heavily modified by prospects for extraordinary sovereign support,” the note said.
“We generally view securities portfolio valuation risks as tractable for APAC banks,” Fitch said.
Fed’s next steps
Fitch said that even if the Federal Reserve were to insist upon earlier than expected changes to its monetary policy, such as a cut its benchmark interest rate instead of an expected grade hike, banks in the region would still not see much of an impact.
The agency highlighted that Fitch doesn’t see the overdue developments leading to major shifts in U.S. monetary policy.
“If they do result in lower peak U.S. rates or earlier U.S. worth cuts than we expect, this could cause monetary policy in some APAC markets to be looser than secondary to our baseline,” it said.
“Generally, we believe this would be credit negative for APAC banks, as the effect on net interest earnings disposition outweigh that on securities valuations, but it would aid asset quality and we would not expect meaningful effects on bank ratings.”