Globally, banks will continue to make progress
in restoring their financial fundamentals.
Financial profiles of banks to strengthen in 2015
NEW YORK, 1 days ago
The standalone creditworthiness of banks across the globe will continue to stabilise in 2015, a report said.
At the same time, the number of negative banking system outlooks has risen, primarily reflecting the potential for a decline in systemic support, particularly in Europe, added Moody’s Investors Service in its just-published report “2015 Outlook – Global Banks: Economic Challenges and Regulatory Reforms Continue to Test Stability.”
Globally, banks will continue to make progress in restoring their financial fundamentals. However, the economic recovery hasn’t been uniform; in some countries it remains fragile, leaving their banking systems more vulnerable to unexpected shocks.
Furthermore, interest rates, which remain at historically low levels, are set to rise in the US, pressuring asset quality, while burgeoning regulatory requirements will raise costs, at banks across the globe.
“The story for banks globally in 2015 derives directly from the low-growth economic environment, with ongoing pressure on asset quality and earnings, and the global regulatory agenda,” said Greg Bauer, a Moody’s managing director. “We expect banks to be challenged by these issues but to continue the progress they have achieved to date in strengthening their financial profiles.”
More specifically, in the US, banks will continue to benefit from above-average and broad-based economic growth, which is allowing them to rebuild their capital bases and write down bad loans.
In Europe, persistently subdued economic growth will constrain banks’ ability to fully clean up their balance sheets. In the emerging markets, a rise in US interest rates could hurt borrowers’ ability to pay down debt and slow capital inflows, which would weigh on banks’ asset quality and earnings.
On the regulatory front, the landscape continues to evolve. Under Basel III, banks face the prospect of requirements for more and higher-quality capital and new liquidity standards. These policies are designed to bolster financial stability, but will make compliance more complex and increase associated expenses, particularly for the largest, systemically important firms. – TradeArabia News Service
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