The rise of non-bank financial institutions is set to continue but there are potential headwinds ahead according to Fitch Ratings
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The past five years has seen strong growth for the non-bank financial sector in Asia Pacific with low interest rates and tighter regulation of banks, resulting in tighter lending underwriting, fuelling the gains.
Fitch Ratings says that it expects that rise to continue but says that there are potential headwinds from normalization of interest rates and greater scrutiny of the non-bank financial sector.
Its assessment notes that across the region’s emerging economies, just 13% of small and medium enterprises have access to credit according to the World Bank and the non-banks offer an alternative solution.
Fitch warns that the sector poses a risk to financial stability due to current low levels of regulation in some markets and vulnerabilities from risk appetite and unproven underwriting which could be exposed by a market downturn.
The agency calculates that in Asia Pacific ‘other financial intermediaries’ – those except banks, insurance companies, pension funds, public financial institutions, and central banks – grew in US dollar terms by 16.9% from 2011-2015, almost double the 8.6% global average.
The growth of the non-bank sector has been rapid in China but Fitch says that elsewhere in the region the market is too small to pose significant systemic risk.
Fitch Ratings says that it expects that rise to continue but says that there are potential headwinds from normalization of interest rates and greater scrutiny of the non-bank financial sector.
Its assessment notes that across the region’s emerging economies, just 13% of small and medium enterprises have access to credit according to the World Bank and the non-banks offer an alternative solution.
Fitch warns that the sector poses a risk to financial stability due to current low levels of regulation in some markets and vulnerabilities from risk appetite and unproven underwriting which could be exposed by a market downturn.
The agency calculates that in Asia Pacific ‘other financial intermediaries’ – those except banks, insurance companies, pension funds, public financial institutions, and central banks – grew in US dollar terms by 16.9% from 2011-2015, almost double the 8.6% global average.
The growth of the non-bank sector has been rapid in China but Fitch says that elsewhere in the region the market is too small to pose significant systemic risk.
