Fitch Ratings: Asia-Pacific Banks Face Rising Exposure to Property Risks

(The following statement was released by the rating agency)


Link to Fitch Ratings' Report(s):

https://www.fitchratings.com/site/re/10086978

Fitch Ratings-Singapore/Hong Kong/London-September 17: Banks in the Asia-Pacific
region are increasingly exposed to property-related risks, Fitch Ratings says in
a new report. The Australian and New Zealand banking sectors have the greatest
exposure to property market stress, while banks in Sri Lanka, Mongolia and
Vietnam have the least protection from loss-absorption buffers. We believe that
regulatory oversight and macro-prudential policies should contain the direct
effect of a residential property downturn on banks, especially in developed
markets where loss-absorption buffers tend to be higher. However, accommodative
monetary and economic policies could aggravate leverage.

Rising household debt increases risks for banks as borrowers' debt-servicing
capacity becomes more sensitive to economic factors, and a high reliance on
property to collateralise loans exposes banks in a property market downturn.
Regulators in most of the region's developed markets have introduced
macro-prudential measures to stem property-sector risks and to strengthen
banking-sector resilience to potential property stress. We believe that
policymakers will remain focused on measures that support stability and prevent
risks of overheating, despite recent macro-prudential loosening in Australia,
New Zealand and Taiwan to support their economies. We expect Hong Kong,
Singapore and South Korea to maintain the tighter bias in their policy settings.