Welcome to the latest edition of Protiviti’s Asia-Pacific (APAC) Financial Services Insights. In this monthly newsletter, we provide a summary of important developments across the APAC financial services sector, including those related to the ever-changing regulatory landscape.
The past month has seen markets across APAC facing their own unique challenges as a result of the ongoing pandemic. In Hong Kong, traditional banks are accelerating digital restructuring because of challenges presented by fintech, while in Singapore the MAS has issued new guidelines aimed to instil a culture of accountability in senior bank managers. The Australian insurance sector could be on thin ice if firms start challenging their business interruption insurance policies and in Japan, coronavirus loans risk allowing ‘zombie’ firms to hobble on if kept in place for too long.
The relative absence of Asian financial firms from climate commitments and key international financial sector climate groupings has severe implications for the future of global green finance. Despite over a quarter of the world's heaviest-emitting firms being located in Asia, the region represents a mere 5% of the signatories to Climate Action 100+.
(International Investment, 02/09/2020)
Singapore and Hong Kong were the biggest destinations for suspect transactions in Asia, even though the financial centers saw just a small fraction of an estimated USD $2 trillion in potentially dubious money flows a recent report reveals.
Annualised credit costs across 79 of the largest Fitch-rated banks in APAC increased to an average of 1.26% of gross loans in 1H20, from 0.84% in 2019. The rise was more marked in emerging markets.
Australia’s insurance sector is on thin ice and could lose as much as AUD $1 billion if firms start challenging their business interruption insurance policies. The Australian insurance sector has also started assessing its risks – with the Australian Financial Complaints Authority joining forces with the Insurance Council of Australia to initiate a test case in the NSW Supreme Court.
(Insurance Business, 22/09/2020)
Governor of the Reserve Bank of Australia stated that policymakers had no concerns about the stability of the country’s banking system. Banking analysts have warned of larger loan losses, weaker profits and smaller dividends, particularly when the government’s COVID-19 jobless benefits run their course at the end of this year.
Hong Kong, S.A.R.
Hong Kong insurance companies are developing more online sales channels and introducing additional medical and retirement products to boost sales. Mainland Chinese, until now big spenders on Hong Kong insurance policies, spent only USD $108 million in the second quarter, down 85 per cent from the first three months of 2020.
(South China Morning Post, 13/09/2020)
Banks in Hong Kong have been preparing for a few years for challenges from fintech, particularly the new wave of virtual banks. Now those competitors are here, but COVID-19 has also forced banks to hasten their own digital restructuring.
Singapore is in the midst of its move from Swap Offer Rate (SOR) to the Singapore Overnight Rate Average (Sora). This comes on the back of the discontinuation of the London Interbank Offered Rate (Libor) at the end of 2021, which would affect SOR as it uses the US-dollar Libor in its computation
(The Straits Times, 10/09/2020)
The 23-page guide is aligned with worldwide efforts to instil a culture of personal accountability among senior managers at banks and financial institutions since the 2008 global financial crisis.
The central bank has increased counter-cyclical adjustment, maintaining the financial market's stability. China has lifted restrictions on foreign shareholding in banking, securities, futures and fund management, and reduced restrictions on shareholder qualifications, such as asset scale and operating term.
China has issued new rules to regulate financial holding companies, in its latest move to prevent systematic risks to the nation's vast financial sector. The new rules were set to stem loopholes in supervision and regulation systems, as a small number of companies expanded into the financial sector without isolation mechanisms and while accumulating risks.
The Bank of Japan’s loan programs to help businesses ride out the recession run the risk of creating more ‘zombie’ companies if they are kept in place for too long, analysts warn.
(Japan Times, 10/09/2020)
Japanese regional banks that are already in operational alliances and serving the same neighborhoods are more likely to merge, as the new prime minister could push more struggling lenders to consolidate in a move aimed at revitalizing the local economy.
(S&P Global, 27/09/2020)