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ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC

Roundtable Discussion on the Asian Banking Sector and Launch of UNESCAP-ADB Joint Publication "Rejuvenating Bank Finance for Development in Asia and the Pacific"

23 October 2002, Bangkok

There can be little doubt that over the past five years or so, since the onset of the economic crisis in Asia in 1997, issues connected to banking have acquired new importance. It is widely accepted that without a sound, well-managed and well-regulated banking sector, economies cannot function efficiently. Without a strong banking sector growth can be adversely affected and public confidence in implicit and explicit contracts, the lifeblood of all modern economies, gravely undermined. In this regard, the position over much of the Asia Pacific region is that banking does require rejuvenation. As debt markets take a long time to develop, it is clear that banking has an important role to play in development for some time to come. Five years after the crisis, although much progress has been made in strengthening the banking systems of the economies affected by the crisis, the sector still remains weak. It needs to be stressed that banking remains the principal conduit for both savings and investment in most economies of the region and plays a major role as a provider of finance for development.

At the most obvious level the problem of non-performing loans has undermined the solvency of the banking systems in many countries requiring huge public and private resources for banks to be re-capitalized. This problem is being tackled but more decisive action is needed in this area. Until banks regain their ability and willingness to lend and become less risk averse, the pace of economic growth is likely to remain muted as many less creditworthy customers will be avoided by the banks. Banks have become more conservative in their lending practices leading to low credit growth.

The publication attempts to examine the complex problems involved in rejuvenating banking from the differing perspectives of China, India, Bangladesh, the Philippines and the Republic of Korea. These studies provide a very good analytical basis for understanding the issues involved and the policy actions that might be appropriate in addressing the problems of the banking sector. The publication also deals with the needs of microfinance to assist the poorer sections of society, especially poor women. In particular, the scope for using microfinance for poverty reduction is an important one, whose potential has to be fully explored.

 
 
 

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