Fitch Ratings-Hong Kong/Singapore-21 March 2021: A rise in yields for long-dated sovereign bonds will result in near-term losses for Asia-Pacific (APAC) banks as they recognise valuation changes on their available-for-sale (AFS) bond portfolios, but the capital impact should be manageable for most rated banks, says Fitch Ratings.

Correlation between banks’ valuations of AFS securities and changes in domestic yields has historically been strong in some APAC markets, as gains and losses are marked to market in the quarter they occur.

The latest data suggest that Fitch-rated banks in Hong Kong, India, Indonesia, Malaysia and Taiwan have the largest AFS securities portfolios, and display particular sensitivity to changes in yields.

In Indonesia and Malaysia, for example, AFS revaluation losses were equivalent to 10%-15% of operating income when yields rose by 50bp or more, resulting in a correlation coefficient of nearly -90% during 2012-2016.

Related Fitch Ratings Content: Impact of Rising Yields on APAC Banks

Read More

About the author

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Sign Up for Our Newsletter

Get notified of our weekly selection of news

You May Also Like

Thai SMEs Exporting to RCEP Countries to receive special loans

Under the campaign, the Export-Import Bank of Thailand (EXIM Bank) has allocated 3 billion baht to issue loans to SMEs, micro SMEs and community enterprises. To be eligible, a business must be looking to export products to the RCEP market.

Bank of Thailand warns of risks of cyber theft when using cryptocurrencies

The future looks promising for cryptocurrencies in Thailand after Siam Commercial Bank Pcl – Thailand’s oldest private bank- invested 17.85 billion baht ($525 Mln) to buy 51% of Thailand’s leading digital asset exchange, Bitkub Online Co.

ASEAN banks face challenges to decarbonize finance

Across the ASEAN region, 15%-30% of banking system loans are to carbon-intensive industries that have high carbon-transition risks such as coal-fired power generation; coal mining; oil and gas