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Barack Obama delivers remarks on finacial reform. (AFP Photo)

Obama’s Plan Unlikely to Trouble Asian Banks

Plans by US President Barack Obama to curb risk-taking by banks are unlikely to adversely affect Asia’s risk-averse financial institutions, according to analysts.

The proposed measures, which aim to roll back corporate excesses and limit dangerous risk-taking on Wall Street, could even be beneficial to Asia as US banks may be forced to move their hedge fund businesses to the region.

“US banks will be forced to be less speculative and return to their core business, which is lending, so liquidity will eventually be better for Indonesia,” said Fauzi Ichsan, Standard Chartered Bank’s chief economist in Jakarta. “It’ll be easier for Indonesian banks to borrow money from US banks or other banks. The regulations will help the financial markets here to become more stable.”

Obama’s plan, described as the largest regulatory crackdown on US financial institutions since the 1930s, would ban the banks from using taxpayers’ money to engage in proprietary trading or operating hedge funds and private equity funds.

His announcement on Thursday sent shockwaves across Asian and European stock markets as investors feared that it could trigger a domino effect among financial regulators worldwide and affect bank earnings.

But banking experts in the region dismissed the market falls as a knee-jerk reaction.

While banks in Britain and Europe are studying Obama’s proposals to see if they will be forced to head the same way, analysts said the resilience demonstrated by Asian banks during the financial crisis proved it was unnecessary for regulators to tighten the reins.

Shane Oliver, an economist with Australia’s AMP Capital Investors, said it was unlikely that regulation of Asian banks would be beefed up.

“Asian banks didn’t run into the sort of trouble that the US ran into through this crisis and it’s unlikely that we’ll see radical regulatory change across Asia,” he said. “There’s no need for Asia’s regulators to be heavy-handed in the way that President Obama is.”

Daniel Tabbush, head of regional banks research for Hong Kong-based broker CLSA, said except for giant HSBC — which has a major presence in the US — he saw no banks in Asia being threatened by Obama’s proposals.

A spokeswoman for HSBC’s Asia Pacific headquarters in Hong Kong said the bank would not comment on the proposals until more details are unveiled.

Shinichi Ina, a Credit Suisse analyst in Japan, said the plan would likely be limited to operations in the US.

“For it to take effect in Europe or Japan you’d have to ask cooperation from regulators there and engineer a comprehensive regulation scheme,” he said.

Although Asia’s financial institutions did not escape the worldwide economic crisis completely unscathed, their losses were dwarfed by those suffered by their Western peers — thanks at least partly to lessons learned from the Asian financial crisis of 1997-98, which left the region with a more prudent investment approach.

Most Asian banks are commercial with relatively small investment banking services and very little proprietary trading, according to Billy Mak, associate professor of finance at Hong Kong Baptist University.



Agence France-Presse

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