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Banks and financial intermediation in emerging Asia: reforms and new risks

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  • Madhusudan Mohanty
  • Philip Turner

Abstract

The conventional view is that microeconomic reforms after the 1997-98 Asian financial crisis have greatly strengthened banking systems in Asia. Banks have become better capitalised, external exposures have been reduced and credit risk has been managed more effectively. But this conventional view does not take enough account of the macroeconomic background. A sharp rise in domestic savings, combined with the recent large-scale sterilised intervention and easy monetary policy, has led to very easy financing conditions for banks. Bank credit expanded. Banks have accumulated a large stock of government bonds. How these conditions will change and how this will affect banks in Asia is uncertain. Supervisory authorities therefore need to be sure that the present very liquid position of most banking systems in Asia does not allow significant (but so far only latent) increases in market and credit risk to go undetected.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 313.

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Length: 25 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:bis:biswps:313

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Keywords: Banking system; Asia; Financial markets; foreign exchange intervention;

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References

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  1. Philip TURNER, 2007. "Are Banking Systems in East Asia Stronger?," Asian Economic Policy Review, Japan Center for Economic Research, vol. 2(1), pages 75-95.
  2. Rajan, Raghuram G & Zingales, Luigi, 2003. "Banks and Markets: the Changing Character of European Finance," CEPR Discussion Papers 3865, C.E.P.R. Discussion Papers.
  3. Tae Soo Kang & Guonan Ma, 2007. "Recent episodes of credit card distress in Asia," BIS Quarterly Review, Bank for International Settlements, June.
  4. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373.
  5. Guonan Ma & Wang Yi, 2010. "China’s High Saving Rate: Myth and Reality," Economie Internationale, CEPII research center, issue 122, pages 5-40.
  6. Wendy Dobson & Anil K. Kashyap, 2006. "The Contradiction in China's Gradualist Banking Reforms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 103-162.
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Cited by:
  1. Thammarak Moenjak & Kengjai Watjanapukka & Oramone Chantapant & Teeravit Pobsukhirun, 2010. "New Globalization: Risks and Opportunities for Thailand in the Next Decade," Working Papers 2010-04, Economic Research Department, Bank of Thailand.
  2. Haq, Mamiza & Faff, Robert & Seth, Rama & Mohanty, Sunil, 2014. "Disciplinary tools and bank risk exposure," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 37-64.
  3. Deryugina, Elena B. & Ponomarenko, Alexey A., 2011. "Identifying structural shocks behind loan supply fluctuations in Russia," BOFIT Discussion Papers 20/2011, Bank of Finland, Institute for Economies in Transition.
  4. Frank Packer & Haibin Zhu, 2012. "Loan loss provisioning practices of Asian banks," BIS Working Papers 375, Bank for International Settlements.

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