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Stable Outlook for Asian Banks: Moody's

Asia's banking sector will return to stability this year driven by better economic conditions throughout the region, said Deborah Schuler, senior vice president for financial institutions group at Moody's Investors Service.

"There will be some bumps on the road this year but certainly, definitely, (a) return to stability for Asian banking sectors," she told CNBC's Asia Squawk Box.

The return to growth in many Asian countries is basically supporting the health of the companies the banks lent to, Schuler added, saying this makes it less likely they will default on their loans.

Moody's recently upgraded its outlook on 12 banking systems to "stable" from "negative" -- namely those from China, Hong Kong, Taiwan, India, South Korea, Australia and the Southeast Asian countries.

Negative on Japan Banks

The outlook for Japan banks, on the other hand, remained negative as the economy was set to face "sluggish economic growth" in 2010, Schuler warned.

"There are signs of deflation returning in Japan," she noted, highlighting weak credit growth, high unemployment, a volatile equity market and limited domestic growth opportunities in the country.

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