Ravi Menon, the Managing Director, Monetary Authority of Singapore, has outlined how Asian banks gained strength from adversity.
Speaking at the symposium on Asian Banking and Finance jointly organised by the Federal Reserve Bank of San Francisco and the Monetary Authority of Singapore, Menon outlined why Asian banks came through the global financial crisis with stronger fundamentals relative to their global peers.
Asian banks emerged from the global financial turmoil with stronger fundamentals relative to their global peers. The crisis revealed glaring weaknesses in many global banks. This led to the implementation of wide-ranging regulatory reforms.
In Asia these weaknesses were less pronounced as Asian banks had already built up significant buffers following the Asian Financial Crisis Menon said.
The Hunters Became Hunted
Helped by stronger fundamentals, Asian banks have since stepped up in regional markets where global banks have retreated. First, they have increased their lending to the region significantly.
In 2007, Asian banks accounted for just a third of all international claims to the region. Today, they account for more than 60 percent of non-local lending to the region. This increase comes on the back of a decline in lending by Euro-area banks.
Second, Asian banks have been acquiring the Asian business lines from global banks, especially in wealth management. In 2013, Sumitomo Mitsui Banking Corporation bought over SocGen’s Japanese private banking arm.
And just late last year, OCBC Bank acquired Barclays’ wealth and investment management business in Singapore and Hong Kong.
Asia The Fintech Leader
Menon also elaborated on why Asia is fertile ground for digital innovation in banking. In Indonesia and Vietnam, only around a third of the population is formally banked. Yet, their mobile phone penetration rates are above 100 percent, that’s more than one phone per person on average.
Using innovative fintech solutions, Asian banks can mobilise untapped savings and provide access to credit for under-banked individuals and businesses.
This coupled with a young and tech-savvy population, equates to a ripe environment for mobile banking, where again the local players are best placed to succeed.
