Singapore’s three major banks- DBS, UOB, OCBC have known to experience high asset-quality issues in South & South East Asia, in terms of the risk from the markets outside the region. This is compared with other regions like China or the rest of the world, as mentioned in the news article released by The Business Times
According to the global credit rating agency, Fitch Ratings, it is not surprising as these regions felt more volatility than the others in the past decade. Some of the event includes the degradation of banks’ loan quality during the fallout of oil and gas sector from 2015 to 2017, DBS being affected by its India middle market portfolio which declined in 2013 to 2014, and UOB classifying some of its shipping accounts as impaired loans.
Despite the introduction of enhancements by Singapore Banks’ in terms of their credit assessment and monitoring , Fitch Ratings remain to speculate about the minimization of credit quality of Singapore Banks.
The article also added that in the credit rating agency’s opinion, the underlying loan quality has yet to be fully tested in a broad downturn, while the exposure has increased in size. They also said that the credit strength of these loans are likely to be “robust and most likely to be tested in the event of economic stress”.
