Asian Banks Better Positioned Than Western Ones: Pro
The absence of an Asian name in the list of financial institutions, which saw their credit ratings cut by Moody’s on Thursday, highlights the strength of the region’s banking sector, says one analyst.
Fifteen global banks including Citigroup , Goldman Sachs and Morgan Stanley had their debt ratings downgraded because their long-term prospects for profitability and growth are shrinking, said the ratings agency.
However, Asian banks are better positioned in times of market volatility, says Tom Quarmby, Director for Equity Research, Asia ex-Japan, at Barclays. "Most importantly they don't have the earnings volatility and risk that Moody’s had highlighted. They are predominantly lenders with lots of capital, deposit funding so they don't have those key areas," he told CNBC Asia’s “The Call.”
Quarmby agrees with Moody’s decision saying the banks in the U.S. and Europe have been getting high levels of government support that will diminish in the medium to long term.
He added that the downgrade shows banks need to be better funded and can’t rely on short term money from other banks. “Financial institutions need to get away from short term wholesale funding and move towards deposit funding,” Quarmby said.
- By CNBC's Cecilia Lo