Political interference greatest risk for banks
KUALA LUMPUR: Political interference is the greatest risk facing the global banking industry now, according to the latest Banking Banana Skins 2010 survey.
At No. 2 is credit risk which stemmed from concern about the effects of the economic recession on the banking industry.
Other top risks identified are too much regulation, macro-economic trends, liquidity, capital availability, derivatives, risk management quality, credit spreads and equities.
“With political interference as the top risk and “too much regulation” at number three, the concern is that the financial crisis has taken the banking industry’s future out of its own hands,” Ong said.
He added that the top risk also brought up other concerns such as moral hazard, politicisation of lending and how governments would withdraw their support.
This view was shared by all types of respondents in all the major banking regions.
Bankers saw politics distorting their lending decisions while non-bankers said political rescues had damaged banks by encouraging reckless attitudes.
Meanwhile, regulators are worried that governments would withdraw their support from banks before they had the time to rebuild their financial strength, precipitating another collapse.
Ong said banks might feel it was alright to fail as they would be bailed out. “The managing director of risk at a large US bank said that it had already begun to breed complacent attitudes: ‘We’ll always be bailed out’.”
Meanwhile, the bulk of the respondents fears a “double-dip” recession with a further wave of bad debts hitting the banks. In the Asia-Pacific region, respondents are worried that a new asset bubble may burst, bringing about a collapse of confidence in the credit markets.
However, the survey shows that some risks are seen to be easing as the world pulls out of the economic crisis. A number of financial risks – liquidity, derivatives, credit spreads and equities – are down from the previous poll in 2008.
A striking fall is the risk from hedge funds, down from tenth to number 19, as their threat is seen to diminish.
Meanwhile, respondents from the Asia-Pacific put “too much regulation” as their top risk. Macro-economic trends and credit risk took the second and third place respectively.
PwC Malaysia partner Soo Hoo Khoon Yean said Malaysia’s issues were probably more akin to the results from the Asia-Pacific.
He said new regulations such as Basel 2 and changes to regulatory capital structure may not be friendly to emerging economies like Malaysia.
Soo said there were some concerns on banks’ capital requirement but it was not as acute as in Western countries, noting that most Malaysian banks were already well capitalised.
The survey, conducted by the Centre for the Study of Financial Innovation (CSFI) in association with PricewaterhouseCoopers (PwC), is based on 443 responses of which 62% are bankers, 32% observers and 6% regulators from 49 countries.
However, there were no responses from Malaysia in the survey. The study was conducted in November and December 2009.
hungyee@thestar.com.my
Bankers see politics distorting their lending decisions
In a briefing yesterday, PwC Malaysia partner Ong Ching Chuan said the poll put political interference at the top of a list of 30 most serious risks to banks “as a result of bailouts and takeover” which posed a major risk to their financial health.
The survey shows that the dash by governments to rescue their banks from disaster may have staved off a collapse of the system, but it has left attitudes to the banking industry deeply politicised, a development which is seen by respondents to be the greatest risk now facing the financial sector.
Political interference has never been a top risk since 1996. The top risk is closely linked to the third risk – “too much regulation” – and the concern that banks will be further damaged by over-reaction to the crisis.
At No. 2 is credit risk which stemmed from concern about the effects of the economic recession on the banking industry.
Other top risks identified are too much regulation, macro-economic trends, liquidity, capital availability, derivatives, risk management quality, credit spreads and equities.“With political interference as the top risk and “too much regulation” at number three, the concern is that the financial crisis has taken the banking industry’s future out of its own hands,” Ong said.
He added that the top risk also brought up other concerns such as moral hazard, politicisation of lending and how governments would withdraw their support.
This view was shared by all types of respondents in all the major banking regions.
Bankers saw politics distorting their lending decisions while non-bankers said political rescues had damaged banks by encouraging reckless attitudes.
Meanwhile, regulators are worried that governments would withdraw their support from banks before they had the time to rebuild their financial strength, precipitating another collapse.
Ong said banks might feel it was alright to fail as they would be bailed out. “The managing director of risk at a large US bank said that it had already begun to breed complacent attitudes: ‘We’ll always be bailed out’.”
Meanwhile, the bulk of the respondents fears a “double-dip” recession with a further wave of bad debts hitting the banks. In the Asia-Pacific region, respondents are worried that a new asset bubble may burst, bringing about a collapse of confidence in the credit markets.
However, the survey shows that some risks are seen to be easing as the world pulls out of the economic crisis. A number of financial risks – liquidity, derivatives, credit spreads and equities – are down from the previous poll in 2008.
A striking fall is the risk from hedge funds, down from tenth to number 19, as their threat is seen to diminish.
Meanwhile, respondents from the Asia-Pacific put “too much regulation” as their top risk. Macro-economic trends and credit risk took the second and third place respectively.
PwC Malaysia partner Soo Hoo Khoon Yean said Malaysia’s issues were probably more akin to the results from the Asia-Pacific.
He said new regulations such as Basel 2 and changes to regulatory capital structure may not be friendly to emerging economies like Malaysia.
Soo said there were some concerns on banks’ capital requirement but it was not as acute as in Western countries, noting that most Malaysian banks were already well capitalised.
The survey, conducted by the Centre for the Study of Financial Innovation (CSFI) in association with PricewaterhouseCoopers (PwC), is based on 443 responses of which 62% are bankers, 32% observers and 6% regulators from 49 countries.
However, there were no responses from Malaysia in the survey. The study was conducted in November and December 2009.
hungyee@thestar.com.my
Comments
Post a Comment