|
|
 |
|
Viewing report
|
|
|
|
Malaysia Commercial Banking Report Q4 2008
Business Monitor International, Dec 2008, Pages: 53
Our Malaysia Commercial Banking Report provides independent forecasts and competitive intelligence on Malaysia's commercial banking industry.
Most of our Q408 reports on commercial banking and insurance were compiled in the second week of October. They were therefore prepared in the immediate wake of the unprecedented events and extreme volatility in global financial markets during the week ending Saturday October 11.
Back From The Brink
Global stock markets soared on Monday October 13 and Tuesday October 14 as investors responded very favourably to official moves to address the global financial crisis. Newspaper headlines indicated that the UK and major European governments had collectively committed around US$2,500bn to rescuing the banking sector. The details vary from country to country; however, at the time of writing, the UK’s is the government that has gone the furthest in moving to part-nationalise major institutions. Overall, the majority of the money committed by the various governments comes in the forms of guarantees on interbank lending or on issuance of new debt by banks. By Tuesday October 14, there was widespread –indeed, correct – speculation that the US government’s US$700bn rescue package, which had been underpinned by the controversial Emergency Economic Stabilization Act (EESA), would be reoriented towards the US government’s purchase of stakes in major banks.
The reaction of stock market investors implies that the governments have dramatically reduced the likelihood of a complete break-down in the global financial system. The essential problem was that, in many countries, the national banking systems were dependent on funding from institutions in other countries. Of the larger countries, Japan and (albeit by a small margin) Canada were the main exceptions in that their banks’ Loan/Deposit ratios were below 100%. The Japanese and Canadian banks were basically able to fund their lending to non-bank customers through stable deposit bases. Iceland, whose government underwent a massive financial crisis as it moved to nationalise the country’s major banks, has thus far been the extreme example of a country where deposits were woefully inadequate relative to the banks’ lending.
In the short term, the key indicators to monitor are the spreads between official interest rates and interbank rates. In an environment where trust between banks had evaporated, these spreads had blown out. Many banks with surplus funds were depositing them (for, usually, very low rates of interest) with their respective central banks. It would be fair to say that, in most of the developed world, governments and central banks have done all that they can to restore trust. Central banks have injected huge amounts of liquidity into banking systems and have greatly broadened the range of collateral that they will accept for loans to commercial banks. In some countries, this implies that the central banks have effectively assumed the role of the commercial banks as providers of credit to non-financial companies. Central banks have also moved – in some cases, such as Australia’s, aggressively – to cut official interest rates. There are schemes to buy non-government bonds (typically mortgage backed securities) for which there is no liquid market. The Troubled Assets Relief Program (TARP) which was the central feature of the US’s EESA, is the biggest and best known of these. Official money has been used to recapitalise or effectively nationalise banks (and, in the US at least, a major insurance company – AIG). By providing guarantees on inter-bank lending, the governments are transforming those banks which have to borrow into a sovereign risk.
In the UK, one of the conditions imposed by the government on those banks into which it was injecting capital was that they must commit themselves to maintaining competitively priced lending to homeowners and small businesses at 2007 levels. A key question which remains unanswered is – will homeowners and small businesses want to borrow at 2007 levels? Most indicators suggest that the UK economy is slowing. The European Commission (EC), for one, has suggested that a recession is likely.
The price of real estate continues to fall. Sentiment within the financial services sector – a key employer in south east England and in parts of Scotland – remains grim. Broadly the same issues apply in the US.
The Looming Problems In Europe
The recent problems of the US and the UK – where imbalances in the financial sectors have given rise to problems in the real economies – have been widely documented. Though there has been relatively little focus on the problems – actual and potential – in the rest of Europe. There are some parts of Europe where, as in the UK and the US, a spectacular boom in housing prices has collapsed. Examples include Spain and Ireland. However, these are exceptions. The implication is that, because the situation for much of Europe is quite different, the risks are lower.
Such a complacent view could be dangerous. The massive issuance of US Treasury bonds over the next year (i.e. as the US government funds most or all of the proposed bail-out) is consistent with a higher cost of capital globally and higher yields for almost all government bonds. All major economies are slowing. Over the last two months, it has become clearer that even China’s economy is decelerating. Whether the Chinese economy remains strong enough to keep the world as a whole out of recession, remains to be seen. A slump in energy prices and lower demand for capital goods, is respectively, bad news for the Middle East and for countries like Germany and Sweden. As the blow-out spreads between inter-bank rates, official rates indicate investors have become risk averse.
All this is happening at a time when the macro-economic imbalances, within particular members of the euro area and within particular countries which are committed to joining the euro area over the medium term are horrendous – as the following table shows.
Also available
Malaysia Commercial Banking Report Q1 2008
Malaysia Commercial Banking Report Q2 2008
Malaysia Commercial Banking Report Q3 2008
Malaysia Commercial Banking Report Q1 2009
Customers who bought this item also bought
Global Regional Banks
Global Commercial Banks
Mutuals and Community Banks - The Strategic Lessons
Central Banks - In Focus
South Korea Commercial Banking Report Q4 2008
Banks and Credit Unions - Industry Profile
UK Direct Banks 2007: Competitors for deposit-based funding
The Top Ten Global Retail Banks: Positioning, Performance and SWOT Analyses
Analyzing the Major Banks of the World
United Arab Emirates Commercial Banking Report Q1 2009
UK Personal Lending 2006
Taiwan Commercial Banking Report Q4 2008
|
|
|
|
