How will the slowing buildup in corporate leverage affect Asia Pacific banks?

Deleveraging efforts increases risks to banks' asset quality.

APAC companies are generally less eager to borrow on weaker economic and trade prospects, soft commodity prices; Moody's expects slower growth in bank loans and corporate debt issuance in 2017.

"This indicates potential deleveraging efforts by the corporate sector, which is good for the long-term but increases the risk to banks’ short-term asset quality, because many firms are overleveraged and have weak cash flows relative to debt service needs," says Moody's.

China’s corporate debt buildup will likely to slow in 2017, due to deleveraging reforms, and Moody's expects interest rates will remain low in 2017, supporting companies’ debt service capacity.