Instead of joining forces to meet the capital requirements, smaller banks instead have sought additional funding. Foreign banks have one-third of the total market but further expansion is limited because they are restricted from opening new branches. Another migraine Manila's banks have only just finished liquidating bad debt incurred in 1980s recessions. Now, after three years of heady economic growth, the bad times may roll again. High interest rates are curbing the economy.
Asset quality is suspect.
Some banks have nearly half of their loans tied up in speculative property and equity markets. But competition is heating up. Exposure to Thailand and Indonesia economies is limited, but a pronounced slowdown in Malaysia could be a drag on profits due to substantial lending in that country. At home, sluggish property and stock markets have slowed loan growth. Nevertheless, Singapore institutions are strong enough to treat the region's banking crisis as an opportunity.