Corporate Finance, DeFi, Blockchain, Web3 News
Corporate Finance, DeFi, Blockchain News

Emerging Markets August Banking Risk Outlook - IHS Report

The August outlook for the Emerging Markets banking sector follows from the IHS Banking Risk Team.


Key Findings
- China: There is likely to be further tightening of shadow banking activities, actions to increase transparency in inter-bank trading, and details on the introduction of a deposit insurance system.
- Myanmar: watch for banking reform
- The Central Bank of Russia relaxed and delayed the implementation of Basel III capital requirements.
- The Hungarian banking sector is bracing for another hit as the government reinstates plans to address outstanding household-sector foreign exchange loans.
- Brazil's top state development bank's exposure to a struggling local conglomerate has renewed underlying concerns over banking risks related to state-directed lending.
- IHS Global Insight's Banking Risk Service downgraded its rating on the Egyptian banking sector by 5 points to 45, Significant Risk, on sovereign-level concerns.
- The merger of Barclay's Africa operations and South Africa's Absa was approved by regional regulators, paving the way for the combined entity to begin trading in August.

China

Items to watch for in August
- Steps to liberalise the financial sector further
- Bank lending practices amid increasing credit risk concerns from the industrial sector

China's authorities are likely to continue the drive of financial sector reforms in August. Following significant turbulence in the inter-bank market in June and steps taken regarding interest-rate liberalisation in July, expectations for further actions will remain strong.

Among the most likely announcements are further tightening of shadow banking activities, actions to increase transparency in inter-bank trading, and details on the introduction of a deposit insurance system. In addition, audit results of China's local government debt, if announced in August, could cause the country's banking authorities to impose new rules on banking sector exposure and lending practices to this segment in the near term.

Meanwhile, amid uncertainty over the country's growth prospects – or the scale of the slowdown – the banking sector will remain cautious about credit risk accumulation from lending to the most affected industries. In addition, the recent announcement from the Ministry of Industry and Information Technology regarding capacity cuts in 19 industries by the end of 2013 will be taken into account when setting new lending conditions.

Myanmar & India

Items to watch for in August
- Banking reform in Myanmar
- Regulatory measures to address currency risk at Indian banks
- Merger and acquisition activities and regulatory approvals

After approving a bill that grants more autonomy to the central bank, Myanmar's authorities will discuss the appointment of the new governor, with the reinstatement of Kyaw Kyaw Maung proposed by the country's president. Authorities will release in the near term more details on the country's forthcoming opening up to foreign bank entry.

In India, the central bank is working on changes to legislation on foreign bank entry and will likely require some foreign banks to transform branch status to fully incorporated subsidiaries. With local currency depreciation affecting the market, the central bank will introduce incremental provisioning and capital requirements for banks' exposure to corporations with unhedged foreign currency positions. The Reserve Bank of India will be accepting comments from the banking community until 2 August, before the final regulations are released.

Commonwealth of Independent States

Items to watch for in August
- New measures by the Central Bank of Russia to curb consumer lending
- Indications of potential capital shortfalls in Russian banks amid forthcoming introduction of new capital rules
- Creation of a single pension fund and re-privatisation of banks in Kazakhstan

As the Central Bank of Russia (CBR) recognised in July, despite a slowdown in retail lending so far in 2013, there are still significant risks within this credit segment and new policy measures are likely to be implemented in the near term. The new central bank leader has said that several new proposals to curb unsecured consumer credit are under consideration, and we expect this topic to remain in the spotlight in the next few months.

Meanwhile, despite having being relaxed and delayed, new Basel III capital rules are to be implemented in Russia; during the third quarter banks will have to work out how much capital, if any, they need to raise to meet the new requirements.

In neighbouring Kazakhstan, the legal establishment of the single pension fund is due by early August. The authorities will be working on the consolidation of pension fund assets over the next few months, currently owned by the country's banks, into this single entity. This operation will go hand in hand with the re-privatisation of the government's shares in banks, with details regarding possible buyers expected to be announced in the second half of the year.

Eastern Europe

Items to watch for in August
- New government programme to deal with foreign exchange lending in Hungary
- Currency and capital outflow pressures in Turkey

The Hungarian banking sector is bracing for yet another hit as the government prepares to launch a programme to address household-sector foreign exchange loans. In what has become characteristic, the Hungarian government is looking for popular support by helping individual borrowers at the expense of the financial industry. With discussions ongoing between the government and the banks, more concrete information on the administration's plan and its implication for financial stability are likely to be announced within weeks.

Latin America

Items to watch for in August
- Additional Brazilian government support for state banks to maintain credit growth
- The Costa Rican central bank's decision on credit growth caps and new prudential regulations
- The Argentine government's grip on the banking sector

Brazilian authorities are likely to offer additional regulatory or financing support to state-run banks to maintain an abundant supply of credit to compensate for the lending slowdown of private-sector banks. While recent data showed improvement in asset quality after months of stricter lending standards, Brazilian private lenders may continue to adjust their credit expansion downward in view of the persistently low credit demand and signals of further monetary tightening.

In Argentina, following warnings of further regulatory tightening on the banking sector, the central bank could release new regulations that will elevate government interference in bank operations. These new regulations are likely to force banks to reallocate additional financial resources towards preferential lending segments, apply new capital controls on foreign exchange operations, and lower lending costs to consumer borrowers and small and medium-sized enterprises.

Middle East and North Africa

Items to watch for in August
- Political developments in Egypt
- Debt restructurings by large regional conglomerates

Ongoing political uncertainty could lead to stress in the banking sector via three main channels: banks' substantial holding of sovereign debt, sizeable lending to vulnerable economic sectors, and the elevated foreign currency lending. Large regional conglomerates could announce additional debt restructuring calls over the next month as debt repayments that were negotiated at the height of the global financial crisis loom. This is particularly true of government-related entities and real estate-related firms in the United Arab Emirates, investment companies in Kuwait, and large family-owned conglomerates in Saudi Arabia that were the most affected by the downturn.

Sub-Saharan Africa

Items to watch for in August
- Merger and acquisition activity and cross-border expansion throughout the continent
- Higher minimum capital requirements
- Unsecured lending by South African banks

We expect to see additional merger and acquisition activity and cross-border expansion throughout sub-Saharan Africa in August, an ongoing trend in the region.

In East Africa, cross-border expansion will continue to be led by Kenyan banks while Nigerian banks may also look to expand following the loosening of regulatory restrictions on such activity made earlier in 2013. At the same time, the planned sale of the first of three banks nationalised following Nigeria's domestic banking crisis is expected to attract interest from regional lenders. Regulators across the continent are seeking to boost financial intermediation and banking sector resilience by increasing minimum capital requirements, and additional increases could be announced in the near term. Such a development could prompt merger and acquisition activity to increase.

In the meantime, although reportedly on a moderating trend, the strong pace of unsecured lending by South African banks should be watched for its potential impact on near-term asset quality. While the unsecured lending boom has so far been led by smaller banks, South Africa's big-five banks, which combined account for more than 90% of total sector assets, have increasingly expanded into this market. The probability that the South African Reserve Bank may announce new macro-prudential measures to rein in unsecured credit in the near term remains high.

ihs.com

Jeudi 5 Septembre 2013




OFFRES D'EMPLOI


OFFRES DE STAGES


NOMINATIONS


DERNIERES ACTUALITES


POPULAIRES