ASIA-PACIFIC banks, including Philippine lenders, have limited exposure in United States subprime mortgages and collateral debt obligations (CDO), according to Fitch Ratings.
Exposure to these financial assets has been responsible for losses at a number of big-name global investment banks and hedge funds, squeezing credit markets and causing stock markets to plunge around the world.
Despite the minimal exposure, the rating company said this would nonetheless trim down the affected lenders’ profits.
In the Philippines, Fitch cited an earlier Bangko Sentral ng Pilipinas announcement that local lenders’ CDO exposure amount to a combined $180 million, or about two percent of the industry’s total equity.
The rating company further noted that Rizal Commercial Banking Corp. disclosed holding $60-million worth of these financial assets, or about 16 percent of the lender’s equity. The said CDOs, however, are backed by corporate debt, and not by mortgages, the rating firm added.
Given the volatility in credit markets, Fitch, however, warned of possible risks to Asian banks beyond their subprime exposures.
“They may have to book accounting losses on marking to market other structured products, whose market values may be depressed by poor market sentiment and low liquidity,” the rating company said.
Subprime exposures are threatened by both mark to market valuation losses and real economic losses, it said, adding that mark to market losses will reflect the sudden drop in market values for these securities, to the extent these can be reliably identified. Those charges could be increased or reversed depending on the ultimate level of economic losses on the underlying securities, the rating company said.
The extent of these economic losses is not yet clear considering ‘AAA’ and ‘AA’ rated securities are unlikely to incur losses but those at the lower end of the investment grade spectrum and below are likely to see significant losses, it added.
The reduction in annual earnings nevertheless poses no systemic risk to Asian banks, Fitch said. “They are not a serious threat to the soundness of the banks we have surveyed,” David Marshall, managing director and head of Fitch’s Financial Institutions Group in Asia-Pacific, said.
http://www.manilatimes.net/national/2007/aug/23/yehey/business/20070823bus1.html
3 comments:
We can all say Thank You Mr. Bush for putting this country in chaos and debt. They say some people have to learn the hard way and that's exactly what happen to the United States. We allowed a drunk, druggie, idiot, crook, dumb as a door knob get to be President twice. Now we're paying for that mistake and we'll be paying for a long time to come.
That was interesting that the Asian banks have survived this turmoil.
Yes the Asian banks had limited exposure to US sbprime mortages and collateral debt obligations because they saw the writing on the wall.
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