HONG KONG, Sept 13, (AFP): Asian banks’ shares rallied on Monday as regulators and investors shrugged off the biggest revamp to global banking rules in decades, confident that regional lenders were already in good shape.
The stricter new rules — known as Basel III — were agreed on Sunday at a meeting in Switzerland of international central bankers and regulators, who said they would avert any repeat of the devastating world financial crisis.
“This, along with global liquidity standards, will be an important financial reform measure after the financial crisis,” the People’s Bank of China, the country’s central bank, said in a brief statement.
The Basel III rules will require banks to substantially raise the amount of capital they hold in reserve — a major change after the 2008 shock revealed inadequate financial buffers when crisis struck.
But the tighter rules will be phased in over several years, and are seen in Asia as a bigger burden for hard-pressed lenders in the West.
“I think this will have more impact on European banks, because local banks have a healthy capital adequacy ratio,” Castor Pang, research director at the financial firm Cinda in Hong Kong, told Dow Jones Newswires.
Against a backdrop of stricter regulation and a more risk-averse culture, Asian banks in general did not indulge in the orgy of risky bets on a shaky housing market that ignited a banking crisis in the United States and Britain.
Outside of sclerotic Japan, banks in the region have not had to go cap in hand for government help, although margins are being squeezed in China as authorities seek higher reserves amid fears about a potential property bubble.
Hong Kong-listed shares of global banking heavyweight HSBC closed up 1.83 percent. In Japan, MUFG shares rose 1.99 percent and Mizuho advanced 1.53 percent.
Meanwhile, Japan’s banking supervisory agency said Monday major banks of the Asian economic power would be able to meet new global rules drawn up by central bankers and regulators.
The group of regulators, the Bank for International Settlements, agreed Sunday at a meeting in Basel, Switzerland that banks would be required to lift their reserves substantially under the new rules.
To prevent a repeat of the global financial crisis, the new regulations — called Basel III — would force banks to more than triple their current reserves and would be phased in from 2013, according to a statement.
Reforms
“We consider that the capital reforms are well balanced,” said an official of Japan’s Financial Services Agency. “In that sense, banks in Japan will be able to achieve the standards through their management efforts.”
Elsewhere, China welcomed a major overhaul of global banking rules, as the Asian nation reportedly considers new moves to strengthen banks’ balance sheets after a post-crisis lending spree last year.
“This, along with global liquidity standards, will be an important financial reform measure after the financial crisis,” the People’s Bank of China, the country’s central bank, said in a brief statement on its website.
China powered out of the global crisis on the back of a massive stimulus package partially funded by state-backed bank lending, which saw new loans reach 9.6 trillion yuan in 2009, nearly double the total of the previous year.
In related news, Singapore’s main lenders said Monday the new global regulations drawn up by central bankers and regulators provided more clarity and that they were confident of meeting the guidelines.
“We are glad to see the greater clarity provided by the new Basel release,” said Soon Tit Koon, the chief financial officer of Oversea-Chinese Banking Corp.
“We will continue to generate common equity through earnings accumulation over the next few years. Our scrip dividend scheme has also helped to preserve our common equity,” he said in a statement.
“These, coupled with the other corporate and strategic actions that we could undertake, gives us full confidence that we will have adequate capital to compete effectively in the marketplace.”
DBS Group Holdings, the largest lender in Southeast Asia, said Singapore banks had been operating at capital levels above those set by the latest BIS guidelines.
“We welcome the harmonisation of global capital standards for banks,” a DBS spokesman said. “All banks have been aware of these proposals for some time.”
DBS said its core Tier 1 capital ratio was 11.1 percent as at June.
The BIS agreed that banks would be required to lift their reserves substantially under the new rules as part of moves to prevent a repeat of the recent global financial crisis.
Called Basel III, banks would be required to hold substantially more reserves by January 1, 2015, with the so-called core Tier 1 capital raised to 4.5 percent from 2.0 percent at the moment.
In addition, banks would be required by Jan 1, 2019 to set aside an additional buffer of 2.5 percent to “withstand future periods of stress”, bringing the total reserves required to 7.0 percent.
The new rules are to be phased in from 2013.
“The Basel Committee has provided more clarity and the timeline for implementation is also more generous than the original December 2009 proposal,” a spokesman for Singapore’s United Overseas Bank (UOB) said.
“The UOB Group will work to meet the requirements/timelines for each of the jurisdictions within which we operate.”