Thursday, July 13, 2017 2:18 PM / Fitch Ratings
bank regulation evolves and how banks respond to regulatory changes are top
issues for global banking investors and market participants based on
discussions at Fitch Ratings' flagship Global Banking Conference, which toured
the world starting in North America and continuing to Europe and Asia in June
New York, 45% of attendees said that higher capital standards have been most
consequential in creating more resilience in banking. Joo-Yung Lee, Fitch's
Head of North American Financial Institutions, commented: "Resolution
planning has been one of the most constructive financial regulations from a
credit standpoint; it has improved risk governance, particularly risk
identification, and has helped banks rationalise their businesses and simplify
their organizational structures."
London, attendees named stress testing requirements marginally ahead of higher
capital standards as the most consequential aspect of financial regulation with
34% versus 31% of the votes respectively. In Hong Kong, 50% of participants
named higher capital standards.
asked about their greatest concerns regarding EU banks, attendees' views also differed
by region with 39% most concerned about earnings in London, 44% choosing asset
quality in New York and 46% selecting asset quality in Hong Kong.
major European banks, we expect a slight improvement in earnings over the
medium term, despite margins remaining under pressure from low interest rates.
Nonetheless, euro area banks with elevated non-performing loans will continue
to face high regulatory scrutiny from the ECB," said James Longsdon,
Co-Head of Fitch's EMEA Financial Institutions team.
Hong Kong, a key topic was how Chinese banks balance growth against stability.
Jonathan Cornish, Head of Asia-Pacific Financial Institutions, said: "The
majority of market participants believe that China will remain challenged by
asset-quality problems, which we understand based on our own scenario analysis,
but we also see rapid growth as having contributed to capital and liquidity
pressures - especially among mid-tier banks - highlighting their weaker credit
profiles relative to the state banks''.
Global Banking Conference has been running for more than 20 years. It brings
together Fitch's financial institutions analysts from around the world for
discussions on the top credit issues impacting the banking industry.