- “The direct exposures of Fitch-rated banks in APAC to SVB and Signature that we are aware of are not material to credit profiles,” Fitch said in a note.
- Shares of banks and financials in Asia-Pacific markets paused in morning trade on Friday after posting steep losses in a volatile week of trading.
A sign for financial agency Fitch Ratings on a building in Canary Wharf business and shopping district in London, UK, Thursday March 1, 2012.
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Asia-Pacific banks are ‘risk-resistant’, evidenced by failures seen in the US banking sector, Fitch Ratings said on Thursday, adding that exposure to Silicon Valley Bank and Signature Bank is insignificant for banks. regions covered by the agency.
“The direct exposures of Fitch-rated banks in APAC to SVB and Signature that we are aware of are not material to credit profiles,” Fitch said in a note.
“The weaknesses that contributed to the failure of both banks are among the factors already factored into our APAC bank rating assessments, but are often offset by structural factors,” Fitch said, adding that exposures tend to to be the largest in India and Japan. .
Fitch’s assessment on banks in Asia-Pacific comes as US Treasury Secretary Yellen said overnight that all uninsured deposits would not be protected in the event of future bank failures.
We generally consider securities portfolio valuation risks to be manageable for APAC banks.
While Fitch perceives a significant risk of deposit volatility for digital banks in the region, it noted that Asia-Pacific governments would likely step in to support their banks when needed – a possibility that will help mitigate additional risks. .
“We believe the risks of valuation losses are outweighed by the likelihood that authorities will provide liquidity support to banks if needed,” the agency said, citing regulators in Australia and Japan as examples.
Officials in the region “are emphasizing strong interest rate risk management,” including in Australia, which imposes a minimum requirement for non-traded interest rate risk, analysts said, adding that Japanese banks had reduced investments in securities and duration.
“Ultimately, the creditworthiness of many Fitch-rated banks in APAC is heavily influenced by the outlook for extraordinary sovereign support,” the note said.
“We generally consider securities portfolio valuation risks to be manageable for APAC banks,” Fitch said.
Fitch said that even if the Federal Reserve were to make changes to its monetary policy sooner than expected, such as a cut in its benchmark interest rate instead of a scheduled rate hike, banks in the region would not see still not much impact.
The agency stressed that Fitch does not see the latest developments leading to major changes in US monetary policy.
“If they translate into lower peak US rates or earlier than expected US rate cuts, this could result in looser monetary policy in some APAC markets than in our baseline scenario,” a- he declared.
“Generally, we believe this would be negative for APAC banks, as the effect on net interest income would outweigh the effect on security valuations, but it would improve asset quality and we do not We do not expect any significant effects on bank ratings.”