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Are Singapore banks at risk from the Greek crisis?
Contagion is a key fear.
Greece’s unraveling debt crisis has grabbed global news headlines worldwide. Although the Greek crisis will have no direct impact on local banks, analysts warn that contagion remains the key risk
“The fear all along has been the possibility of contagion from a Greece exit and what it may cause to others within the group that may be just as vulnerable, other emerging markets (and their currencies) being targeted for similar default risk fears, and the uncertainty of how strong the remaining members of the EU may be in keeping the union intact. If this situation snowballs, and it could, then investors should be fastening their seatbelts in the second half,” said Nicholas Teo of CMC Markets.
However, CIMB analysts Kenneth Ng and Jessalyn Chen noted that the current debt crisis will have limited drag on local banks.
“Barring contagion effects to non-European banks, we conclude that the 2015 version of the Greek debt crisis would have limited drag on Singapore banks, which in 2011, gained Asian trade finance market share. The Singapore banks did not have any Portugal, Ireland, Italy, Greece and Spain (PIIGS) debt in 2011 and UOB even pared down its holdings of North Europe FI debt. Compared to 2008/2011, we believe the Singapore banks are better positioned now, as interest rates are expected to rise,” they said.
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