(아주경제 신기림 기자) “Emerging Asia is leading the global recovery and it is the first time to global recovery exceeds that of other regions, however the Asian countries are still very exposed to stalling global demand and bank deleveraging in Europe may have adverse repercussions in Asia.”
Subir Lall, division chief of the international monetary fund (IMF)’s Asia and Pacific Department, said Wednesday that in some Asian countries where the recovery is well advanced and output gaps are closing rapidly, during the presentation in 2010 international financial forum held by the Asia Business.
Under the title of the financial crisis in Europe and its impact on Asia and the world, he first mentioned the current global financial market conditions including the state of global banks and the heightened concerns about sovereign risk in Europe.
“Banks’ losses are moderating as the economic output recovers, but sovereign risks threaten to take the current crisis to a new stage,” he said.
Capital buffers remain weak for some smaller banks and strains in the funding market start reappearing.
For instance, the tier 1 capital ratios of major U.S. banks in 2009 accounted 11.3 percent out of total assets while smaller banks’ ratio took 10.3 percent.
The Tier 1 capital ratio is the ratio of a bank's core equity capital to its total assets, which represents the financial health of banks.
He also analyzed the causes underlying the rising concerns in markets about fiscal situations in G20 advanced economies and the associated spillovers to banking system.
The increasing public debt in advanced countries causes the worrisome voices in Asia to rise and the associated effect on the banking system, he said.
The specialist on Korean economy highlighted that the Asian economy has limited exposure to crisis in European area given the stable cost of capital for Asia’s banks and manageable pressure for US dollar funding.
However, he warned that bank deleveraging in Europe may have adverse repercussion in the region and capital inflows to Asia pose financial risks.
Mr. Lall said that large capital inflows have the potential to fuel asset price inflation in the region.
“Hence, safeguarding stability will mean putting in place a range of macroeconomic and regulatory measures,” he recommended.
The Korean government has recently lowered the maximum loan-to-value ratios and debt-to-income ratios in Seoul and surrounding areas.
He concluded that policymakers will need to be mindful of downside risks such as inflationary pressures and asset bubble, but only if they materialize should countermeasures be contemplated.
Lall holds a B.A. in Economics from the University of Delhi and a Master's and Ph.D. in Economics from Brown University, where he was the recipient of the Susan B. Kamins Fellowship.
He has been a member of IMF country teams in Asia, Eastern Europe and Latin America.
He is the lead author of the IMF World Economic Outlook studies on "Building Institutions", "Financial Systems and Economic Cycles", "Globalization and Inequality" and “Financial Stress and Economic Cycles”.
His other research interests and academic publications are in the areas of speculative attacks, contagion and financial crises, and financial market microstructure.
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