The "Best of theWeb" rounds up some of the more noteworthy recent coverage we haveencountered on issues affecting the Asia-Pacific financial sector. Please notethat some links may require a subscription.
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The supposed truth about Chinese banks being well-capitalizedis becoming less of a certainty as banks deal with more capital requirements, The Wall Street Journal reported. Asprofits shrink and loans soar, banks are dealing with tighter regulatory rules.Chinese banks have raised more capital in response. In the last two years,Chinese banks raised US$60 billion of Additional Tier 1 capital. They have alsoraised US$64 billion of Tier 2 capital. Issuing Tier 2 bonds seems like a goodtrade but these bonds can be written off if China's banking regulator says so.Under capital rules in accordance with Basel III, the regulator can takewide-ranging supervisory actions. Tier 2 bonds can be written off and there areno hard definitions of a trigger event for the bonds.
After more than a decade of no bank robberies, Singaporebanks' complacency was shattered when a bank robber stole S$30,000 from aStandard CharteredPlc branch last July 7. The rare bank robbery raised concerns thatauthorities and society have become too used to the low crime rate environment,Reuters reported. Authorities released few details about the theft, raisingquestions about the bank's security. Reuters reported that the robber slippedthe teller a note saying he was armed. The bank said there was no guard on dutyduring the incident. Police had defended their refusal to release details aboutthe crime, saying they needed to do so to make sure the arrest operation wasnot jeopardized. The suspect was eventually arrested in Thailand.
As Indian banks deal with mounting bad debts, authoritieshave proposed establishing a "bad bank" that will clean up theirbalance sheets. Bad banks buy bad assets from banks, allowing them to write offthe loss and strengthen their capital adequacy ratios, The Financial Express reported. The issue is how to set up this badbank. Allowing the private sector to create a bad bank is akin to assetreconstruction companies, which already exist and do not have the financialstrength to clean up the banking system. The government has to take on theresponsibility to address the bad loans from state-owned banks. The bad bankmust have strict performance criteria for buying bad loans and banks mustjustify the sale of their bad assets to the bad bank.
Australian banks are facing a confluence of three threats totheir performance — political headwinds, a threat to their ratings and callsfor more capital, Reuters reported. Australia's big four — , CommonwealthBank of Australia, National Australia Bank Ltd. and — saw S&PGlobal Ratings downgrade their ratings outlook to negative, implyingthat their AA ratings could be downgraded in two years. A ratings downgradecould not come at a worse time for Australia's big four as regulators want themto raise more capital to weather any repeat of the global financial crisis. Thebig banks are also at risk from the changing political landscape. Australia'srecent election ushered in politicians who are pushing for an inquiry inmisconduct and market dominance concerns of the big four.
Foreign banks are losing market share in Malaysia as theyremain cautious on the consumer segment, TheStar reported, citing data from Bank Negara Malaysia. The combined netinterest income for the Malaysian operations of Standard Chartered, , Citibank Bhd.and United Overseas BankLtd. contracted for five straight quarters. The lower net interestincome was likely due to rising cost of funds and more competition, accordingto a report from TA Research. The foreign banks have also been focused on morebusiness and corporate-based loans. However, the asset quality of the fourforeign banks have held up, with total gross impaired loans falling by close to2% year over year in the first quarter. In comparison, the eight local bankshave seen double-digit increases in gross impaired loans.