Asian banks to face indirect impact of US turmoil: S&P

SINGAPORE: Standard & Poor's Ratings Services has said the direct exposures of rated banks in Asia ex-Japan to Lehman Brothers are not expected to be significant enough to materially damage their credit profiles.

"A few Taiwan, Philippine, and Chinese banks appear to have more direct exposure to Lehman Brothers entities," said S&P's credit analyst Ritesh Maheshwari. "However, Asian banks' strengthened balance sheets, as a result of healthy profits over the vibrant economic environment during the past half a decade, can withstand the impact of likely losses from direct exposure, without rating downgrades."

"We continue to believe that the risk to Asian banks is more from the impending economic slowdown and market turmoil than from direct exposure to the distressed U.S. financial institutions," Maheshwari said.

He noted that Asian banks' exposure to structured finance products were similarly not material enough to do substantial damage.

The latest turmoil in the US financial sector beginning with Lehman Brothers Holdings' bankruptcy filing and uncertainties about AIG's flexibility in meeting additional collateral needs could accelerate and exacerbate the economic impact on Asia.