At the Asia Pacific Banking Industry 2022 Outlook virtual session, chief economists and industry experts discussed key challenges and risks confronting the banking sector in the region. The dialogue covered the state of the global economy and financial systems, impact of the COVID-19 pandemic resurgence, and how banks in APAC will perform in 2022.
Alicia Garcia Herrero of Natixis, Taimur Baig of DBS, Bert Hofman of National University of Singapore, Eugene Tarzimanov of Moody’s, and Oleg Patsianskiy of BPC shared their insights and analysis of the industry outlook in 2022. Foo Boon Ping, managing editor of The Asian Banker, was the session moderator.
The session began with an optimistic forecast from Herrero as she projected an economic recovery for Asia Pacific as the US eases off its fiscal and quantitive tapering. However, she also warned that the new COVID-19 variants may lead to more restrictions on domestic and international mobility and impact supply chains. In terms of credit risks, the banking industry in the region would see a moderate increase in 2022
Meanwhile, Baig tackled the reopening dynamics in emerging markets, clouded by US monetary policy moves and reflected by high inflation rates and quantitative tightening. “We're beginning to see the dollar strengthens against emerging market currencies and around that narrative, we will see a broad range of implications for emerging markets… Asian central banks will not match one for one.”
Hofman delved into how China is taking a different track by signalling an increase in infrastructure spending and lowering banks' statutory reserves that will help stimulate the economy. Meanwhile, Tarzimanov, spoke about the downside risk of increasing private household debt impacting banks' asset quality. Patsianskiy discussed the growing competition between fintechs, digital banks and the traditional banks. Although the banking and economic outlook may be stable in 2022, the panelists emphasised that geopolitical risks persist and appear to be escalating and may result in significant unintended consequences. They also discussed the risk to financial markets and currencies should an over hawkish or mis-perceived inflation-induced rate hike materialised in the US, that will especially impact emerging markets and create a contagion in global markets.
The following key points were discussed:
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