Unique challenges to each country are emerging from the global crisis
It is widely argued that Asia is well-prepared to weather renewed turmoil on the back of the lessons learned from 1997—both on the part of regulators and banks themselves. Yet, the almost daily onslaught of faltering and contagion that has manifested itself worldwide is clearly as much a test for the region as it is for players long viewed as the pinnacle of good business practice but that are now struggling to keep their heads above water.
The region’s lending business outlook remains mixed—though growth is widely set to continue in 2009, it is expected to occur at a substantially lower rate than as a little as a few months ago as banks deal with distrust and a tight lending environment. The credit clampdown is especially damaging for small and medium-size enterprises, critical to Asia’s economies and deeply tied to vulnerable export-oriented manufacturing and construction sectors. The travails of distressed retail and commercial borrowers will become more problematic for banks as default rates rise, although the region’s still-low 5% bad loan ratio as of November and improved risk provisioning do provide an important shock absorber.
