RETAIL BANKING | Roxanne Uy, Singapore

What keeps Singapore banks the world’s strongest?

Reports say that OCBC, UOB, and DBS lead Bloomberg’s ranking of the world’s strongest banks - what could be the key to their success?

IG Markets: Justin Harper, Head of Research
Singapore’s banks manage their risks well and are conservatively run. They have definitely benefited from the strong economy and from a very high portion of high net worths who have considerable assets to deposit with the banks and are a low risk. This keeps their non-performing loan ratios low compared to other companies. Interest rates on savings are very low here which keeps costs down further. Singaporean banks also benefit from the country being a major financial and commodities trading hub with plenty of transaction banking demand. The banks are also very forward thinking and always looking at expansion within the region in Indonesia, China and the Philippines for example.

Fitch Ratings: Alfred Chan, Director, Asia-Pacific Financial Institutions
Singapore banks should be able to keep their credit profiles intact, even as the probability of a fresh global downturn appears increasingly likely.The agency's expectation stems from the banks' strong and liquid balance sheets, reasonably diversified loan books and satisfactory risk management, and the government's fiscal capacity to introduce countercyclical measures to protect the domestic economy - as evident during the 2008-2009 global turmoil. Downside rating risks could result if the renewed downturn were to be sharp and protracted, resulting in significant capital impairment risks, although Fitch views this likelihood as low in view of the banks' solid loss-absorption defences and satisfactory record.

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