princess_morbucks
15-07-13, 15:20
http://www.todayonline.com/business/moodys-downgrades-singapore-banking-system-outlook-negative
SINGAPORE--Moody’s Investors Service has changed the outlook for Singapore’s banking system to negative from stable, citing the recent period of rapid loan growth and rising real estate prices in Singapore and in regional markets where the three local banks are active.
These factors have increased the probability of deterioration in credit quality under potentially adverse conditions for the banks in the future.
The report, “Singapore Banking System Outlook,” details Moody’s expectations of how bank creditworthiness will evolve over the next 12-18 months.
The report noted that Singapore banks continue to have strong financial metrics, underpinning their high average ratings compared to all banking systems globally.
Nevertheless, potential risks are starting to emerge, according to Mr Gene Fang, a Moody’s Vice President and Senior Analyst,
“The operating environment for Singapore’s banking system has been favourable for an extended period, with low interest rates and strong economic growth domestically and in the surrounding region,” he said.
“With the potential risk of a turn in the interest rate cycle, we view strong asset inflation and credit growth trends as vulnerabilities, as this combination would likely cause credit costs to rise from their current low base.”
While Singapore banks have improved their non-performing loans (NPLs) over the past few years, the report said, asset quality has potentially peaked both at home and in many of the regional markets in which these banks operate.
A turning point in the credit cycle is likely to lead to a worsening of NPL ratios and higher credit costs.
Although it is difficult to predict turning points in banking credit cycles, Moody’s believes the increased likelihood of a tightening of monetary policy by the United States -- with a higher probability of a tapering of quantitative-easing during the outlook period -- is a potential trigger.
“Our outlook is a directional, forward-looking view of the trend in the banks’ relative credit quality, which we consider as having potentially reached - or to be close to reaching - a cyclical peak,” Mr Fang said.
----------------------------------------------------------------------
Does it mean interest rate are set to increase ?:scared-3:
SINGAPORE--Moody’s Investors Service has changed the outlook for Singapore’s banking system to negative from stable, citing the recent period of rapid loan growth and rising real estate prices in Singapore and in regional markets where the three local banks are active.
These factors have increased the probability of deterioration in credit quality under potentially adverse conditions for the banks in the future.
The report, “Singapore Banking System Outlook,” details Moody’s expectations of how bank creditworthiness will evolve over the next 12-18 months.
The report noted that Singapore banks continue to have strong financial metrics, underpinning their high average ratings compared to all banking systems globally.
Nevertheless, potential risks are starting to emerge, according to Mr Gene Fang, a Moody’s Vice President and Senior Analyst,
“The operating environment for Singapore’s banking system has been favourable for an extended period, with low interest rates and strong economic growth domestically and in the surrounding region,” he said.
“With the potential risk of a turn in the interest rate cycle, we view strong asset inflation and credit growth trends as vulnerabilities, as this combination would likely cause credit costs to rise from their current low base.”
While Singapore banks have improved their non-performing loans (NPLs) over the past few years, the report said, asset quality has potentially peaked both at home and in many of the regional markets in which these banks operate.
A turning point in the credit cycle is likely to lead to a worsening of NPL ratios and higher credit costs.
Although it is difficult to predict turning points in banking credit cycles, Moody’s believes the increased likelihood of a tightening of monetary policy by the United States -- with a higher probability of a tapering of quantitative-easing during the outlook period -- is a potential trigger.
“Our outlook is a directional, forward-looking view of the trend in the banks’ relative credit quality, which we consider as having potentially reached - or to be close to reaching - a cyclical peak,” Mr Fang said.
----------------------------------------------------------------------
Does it mean interest rate are set to increase ?:scared-3: