18-10-2012, 07:55 PM
What I got from reading this article is not that the financial industry is set to grow but rather that the Basel rule will take place in 2013. The Basel rule is something new to me but I thought it is worth sharing especially if you guys are not in the financial industry. I have copied the definition of Basel rule from Wiki.
Why this is in the Property sub forum and not the economy sub forum is because IMO, it looks like there might be some impact to the housing market given that the Basel rule will take place in 2013. With this new rule, banks may not be able to lend out as much money as they wish too; hence, they may need to either 1) attract people to put in deposit or 2) increase the bank lending rates.
Wiki says that Basel
"Basel III will require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of Tier I capital (up from 4% in Basel II) of risk-weighted assets (RWA). Basel III also introduces additional capital buffers, (i) a mandatory capital conservation buffer of 2.5% and (ii) a discretionary countercyclical buffer, which allows national regulators to require up to another 2.5% of capital during periods of high credit growth. In addition, Basel III introduces a minimum 3% leverage ratio and two required liquidity ratios. The Liquidity Coverage Ratio requires a bank to hold sufficient high-quality liquid assets to cover its total net cash outflows over 30 days; the Net Stable Funding Ratio requires the available amount of stable funding to exceed the required amount of stable funding over a one-year period of extended stress."
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SINGAPORE: The finance sector in Asia is poised for significant growth in the next 10 to 15 years, said Singapore's Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.
Speaking in his capacity as the Chairman of the Monetary Authority of Singapore, Mr Tharman said Asia's long-term potential remains intact and there will not be a sudden dislocation of Asia's finance market.
However, DBS CEO Piyush Gupta warned that the sector may face some headwinds in the near-term, as new Basel rules take effect from 2013 and may cause a liquidity crunch.
Asia's growth drivers will continue to drum up opportunities for the finance sector.
Speaking at the opening of DBS Bank's new headquarters at Marina Bay Financial Centre, Mr Tharman said all segments of banking are expected to see regional growth.
One area is the Asian bond markets, which will see significant growth over the next 10 years.
He said: "In the first three quarters of this year, almost US$800 billion of bonds were issued, compared to about US$525 billion last year. And this is in a down year for the Asia Pacific -- a very significant growth in Asian bond issuance.
"And over the long term, I've no doubt that the Asian bond markets -- they will now have their day. This next ten years is going to be a period where we're going to see significant growth in the Asian bond markets."
Still, Mr Tharman said there are challenges ahead, including de-leveraging in the banking sector in the West as well as stricter Basel rules on capitalisation.
However, he said these challenges will not dislocate the Asian banking sector suddenly because Asian banks are well-capitalised and have put in place more risk and credit management measures.
Mr Tharman added that international banks will want to preserve their Asian franchises given Asia's stronger growth potential relative to other regions.
Speaking to the media later, DBS CEO Piyush Gupta said the Basel requirements - aimed at strengthening bank capital adequacy - could have an impact on the real economy.
"The headwinds coming from Basel, which kicks in from January 2013, are quite severe globally which is both the capital requirements and liquidity requirements... And the impact would be both the availability of credit, but more importantly the cost of credit. I think banks are increasingly going to have to start pricing for the extra capital that they have to hold and it will spill over into the real economy."
Looking ahead, Mr Gupta said DBS will continue to grow its staff strength as it expands its footprint.
It hires 18,000 employees currently and is projected to grow its headcount by 7 to 8 per cent this year.
Responding to a question about the impact of the recent measures to cap property loan tenures, Mr Piyush said loan volume remains fairly robust and he does not see a bubble in the Singapore property market.
- CNA/cc
Why this is in the Property sub forum and not the economy sub forum is because IMO, it looks like there might be some impact to the housing market given that the Basel rule will take place in 2013. With this new rule, banks may not be able to lend out as much money as they wish too; hence, they may need to either 1) attract people to put in deposit or 2) increase the bank lending rates.
Wiki says that Basel
"Basel III will require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of Tier I capital (up from 4% in Basel II) of risk-weighted assets (RWA). Basel III also introduces additional capital buffers, (i) a mandatory capital conservation buffer of 2.5% and (ii) a discretionary countercyclical buffer, which allows national regulators to require up to another 2.5% of capital during periods of high credit growth. In addition, Basel III introduces a minimum 3% leverage ratio and two required liquidity ratios. The Liquidity Coverage Ratio requires a bank to hold sufficient high-quality liquid assets to cover its total net cash outflows over 30 days; the Net Stable Funding Ratio requires the available amount of stable funding to exceed the required amount of stable funding over a one-year period of extended stress."
--------------------------------
SINGAPORE: The finance sector in Asia is poised for significant growth in the next 10 to 15 years, said Singapore's Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.
Speaking in his capacity as the Chairman of the Monetary Authority of Singapore, Mr Tharman said Asia's long-term potential remains intact and there will not be a sudden dislocation of Asia's finance market.
However, DBS CEO Piyush Gupta warned that the sector may face some headwinds in the near-term, as new Basel rules take effect from 2013 and may cause a liquidity crunch.
Asia's growth drivers will continue to drum up opportunities for the finance sector.
Speaking at the opening of DBS Bank's new headquarters at Marina Bay Financial Centre, Mr Tharman said all segments of banking are expected to see regional growth.
One area is the Asian bond markets, which will see significant growth over the next 10 years.
He said: "In the first three quarters of this year, almost US$800 billion of bonds were issued, compared to about US$525 billion last year. And this is in a down year for the Asia Pacific -- a very significant growth in Asian bond issuance.
"And over the long term, I've no doubt that the Asian bond markets -- they will now have their day. This next ten years is going to be a period where we're going to see significant growth in the Asian bond markets."
Still, Mr Tharman said there are challenges ahead, including de-leveraging in the banking sector in the West as well as stricter Basel rules on capitalisation.
However, he said these challenges will not dislocate the Asian banking sector suddenly because Asian banks are well-capitalised and have put in place more risk and credit management measures.
Mr Tharman added that international banks will want to preserve their Asian franchises given Asia's stronger growth potential relative to other regions.
Speaking to the media later, DBS CEO Piyush Gupta said the Basel requirements - aimed at strengthening bank capital adequacy - could have an impact on the real economy.
"The headwinds coming from Basel, which kicks in from January 2013, are quite severe globally which is both the capital requirements and liquidity requirements... And the impact would be both the availability of credit, but more importantly the cost of credit. I think banks are increasingly going to have to start pricing for the extra capital that they have to hold and it will spill over into the real economy."
Looking ahead, Mr Gupta said DBS will continue to grow its staff strength as it expands its footprint.
It hires 18,000 employees currently and is projected to grow its headcount by 7 to 8 per cent this year.
Responding to a question about the impact of the recent measures to cap property loan tenures, Mr Piyush said loan volume remains fairly robust and he does not see a bubble in the Singapore property market.
- CNA/cc