APAC banks in stronger capital positions than global peers

Regulators have more conservative local rules.

Asia Pacific's largest banks have strong capital positions compared to their American and Western European counterparts, according to an analysis by Moody’s Ratings.

The Common Equity Tier 1 (CET1) capital adequacy ratios of large banks in Asia-Pacific are generally high as they operate under stringent regulatory requirements, the ratings agency said in a report.

Regulators have adopted conservative local rules for the calculation of RWAs, including limits on the use of internal models, it added.

“Notably, the Australian Prudential Regulation Authority (APRA) goes further by imposing tougher capital requirements than general recommendations from the Basel Committee on Banking Supervision (BCBS),” Moody’s said.

Not all things are rosy, however. Banks from developed markets (DMs) in APAC are more likely to take on risk as their margins shrink.

Riskier appetites can already be observed in Australia, where banks have emphasized growth in the small and medium-sized enterprise sectors in recent years, Fitch Ratings said in an earlier report.

One-way banks may be able to try to make a profit is through social media. Institutions that operationalise financial media networks could realistically see a 20% – 30% uplift in noninterest income within two years, according to SAS.