Asean banking systems are better prepared for potential market volatility than during the period leading up to the 1997 financial crisis, Fitch Ratings said.
In a report released on Friday, the debt watcher stressed that Southeast Asian banks had made good strides in the aftermath of the 1997 meltdown.
“Some challenges remain, but we believe the banks are better prepared for potential market volatility and external shocks now that the Fed has turned towards monetary policy normalization,” it said.
Fitch added that strengthened banking system policy frameworks and buffers, as well more flexible exchange-rate regimes, should limit vulnerability to net capital outflows and absorb pressure from trade imbalances.
US dollar-denominated loans are also significantly lower today while hedging is more commonly employed, rendering banks less likely to see the magnitude of non-performing loan ratios witnessed during the Asian financial crisis.
“Asean economies also have stronger buffers and more accommodating macroeconomic policies,” it said.
The Association of Southeast Asian Nations is composed of 10 member states: the Philippines, Brunei, Indonesia, Malaysia, Singapore, Thailand, Myanmar, Cambodia, Laos, and Vietnam.