Officials in the region "emphasize strong interest-rate risk management," including in Australia, that levies minimum requirement for non-traded interest rate risk, the analysts said, adding that Japanese banks have been reducing securities investments and duration.
"Ultimately, the creditworthiness of many Fitch-rated banks in APAC is heavily influenced by prospects for extraordinary sovereign support," the note said.Fed's next stepswere to make earlier than expected changes to its monetary policy, such as a cut its benchmark interest rate instead of an expected rate hike, banks in the region would still not see much of an impact.
The agency highlighted that Fitch doesn't see the latest developments leading to major shifts in U.S. monetary policy. "If they do result in lower peak U.S. rates or earlier U.S. rate cuts than we expect, this could cause monetary policy in some APAC markets to be looser than under our baseline," it said.
"Generally, we believe this would be credit negative for APAC banks, as the effect on net interest earnings would outweigh that on securities valuations, but it would aid asset quality and we would not expect meaningful effects on bank ratings."
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