Posted on: Tuesday, April 24, 2001

Many Asian banks on shaky ground

Associated Press

SINGAPORE — Many banks in Asia are plagued with problem loans and are unprepared for the effects of an economic slowdown in the United States and Japan, ratings agency Standard & Poor's said in a report yesterday.

Banks in Indonesia, India and China are the least prepared for a downturn and remain plagued with inadequate capitalization and poor risk management systems, the report said.

"Some of these banks have not yet fully recovered from the Asian financial crisis in 1997-1998 and they are already facing a more difficult operating environment," said Ian Thompson, the author of the report.

Banks in Taiwan, Hong Kong and Singapore form the lowest risk group in emerging Asia and are likely to better weather the current economic slowdown, the report said, adding that Thailand, Philippines, Malaysia and South Korea are somewhere in the middle.

Indonesian banks are still picking up the fragments of the 1997-1998 financial crisis. They continue to face a fragile political and economic environment, poor loan quality, and uncertain collateral values.

China's banking sector, though evolving, still has a significant amount of "latent risk," the report said.

The arduous process of transforming China's state-owned enterprises into market-oriented businesses will continue to hamper the Chinese banks' efforts to resolve their persistent problem of bad loans.