APAC-BFSI-Outlook-2017

MAJOR GLOBAL BANKS IN THE ASIA PACIFIC REGION EMBARK ON A COST CONTAINMENT DRIVE OVER THE LAST COUPLE OF YEARS.

the foreign investment limit to 74% for local private banks, but its regulatory environment is still prohibitive compared to other emerging markets. Meanwhile, the credit ratings of the Philippines, Vietnam and India have all improved over the last two to three years as a testament to their steady economic growth and macroeconomic stability.

China and Japan have played a key role in this trend. In the years since the crisis, major mainland Chinese banks have significantly ramped up their overseas lending and with it their overseas operations, in the process boosting their oŸce footprint across key cities in Asia. Meanwhile, according to the IMF, Japanese banks have been even more aggressive than their Chinese counterparts since the global financial crisis. Despite the growth of regional banks, parts of Asia are still underserved and the financial maturity of some emerging markets – including Bangladesh, Myanmar, Cambodia, Indonesia, the Philippines and Vietnam – is still below 40% (India is at 55%). Part of the problem lies with these countries’ protectionist policies and “higher risk” credit ratings, which mandates banks to keep higher capital bu¥ers in the post-GFC regulatory environment. However, conditions are gradually improving with higher- than-average growth rates, improving ratings and easing norms. For example, the Philippines opened the doors to foreign banks through the Republic Act (RA) 10641 in mid-2014. Japan’s Sumitomo Mitsui Banking Corporation (SMBC) recently launched their banking operations in the Philippines to take advantage of the

liberalized policy, opening a branch in Manila, and five more banks have been granted approval by the government to enter the country. Vietnam began to allow 100% foreign-invested banks in 2008, but the ceiling of 30% foreign ownership in a domestic bank is still a deterrent for external investors. India allowed foreign banks to set up wholly owned subsidiaries in 2011 and lifted

FINANCIAL MATURITY IN ASIA

120%

Australia

Japan

Singapore

100%

South Korea

Hong Kong

Malaysia

China

80%

Thailand

60%

India

40%

Indonesia

Philippines Vietnam

20%

Bangladesh

Adults with an account at a formal financial institution (2014), %

0%

- 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

GDP per capita, ppp, 2014

Source: Global Findex World Bank, Maybank, Oxford Economics, Cushman & Wakefield Research

20 ASIA PACIFIC BFSI OUTLOOK 2017