More Asian banks looking to capital markets to boost profits: ADB

More Asian banks looking to capital markets to boost profits: ADB
By Lynda Hong | Posted: 07 December 2012 2229 hrs

SINGAPORE: More banks in Asia are cutting their lending businesses and mobilising their liquidity in the capital markets to boost profits, said the Asian Development Bank (ADB).

ADB said banks in the past few months have opted to take more risks, such as investing in financial markets, derivatives and securities.

"If you run a bank and you raise the funds not through the core source of funding, which is deposit, it can affect your behaviour in terms what you do with the asset side," said Iwan Jaya Azis, head of the Office of Regional Economic Integration (OREI) at ADB.

More companies are also choosing to raise more funds by tapping the bond market, said experts.

"We are still a bank dependent economy. The banking sector is still the biggest financial sector in the economy. But since 2003, we have seen the bond market in this part of the world growing very fast and of course as it grows fast it is exposed to global uncertainties," said Senior Economist at AMRO Reza Siregar.

To grow Asia's corporate bond market, experts say improvements on financial infrastructure, transparency and ratings should be made.

So far, the corporate bond market has grown faster than sovereign bonds.

However the ADB notes that some Asian countries are still lacking social infrastructure in education and nutrition.

This will raise the need for more sovereign bonds in the coming years.

- CNA/jc

- wong chee tat :)