Good economic conditions and internal reform efforts over the past two years have laid solid foundations for banks in some of the weaker banking systems of the region to continue to reform themselves in 2006. The Chinese banking system made a strong showing in 2005 on the back of strong government support and a high growth economy, although challenges remain.
Indian and Indonesian banks, like Chinese banks, are benefiting from favorable economic conditions. Japanese banks are making a comeback and reporting some meaningful profit figures, while Korean banks are improving their risk management techniques in consumer lending and rebuilding their consumer banking business models after learning costly lessons in the past.
In Taiwan, the regulatory regime appears to be changing for the better, although politics on the island may prove a stumbling block.
Other banking systems continued their previous trends. The banking systems in Australia, Hong Kong, New Zealand, and Singapore continued to have the lowest risk in the region. While each faces different challenges, including competition in mature home markets, pressure on profitability, and slowing GDP growth, they remain strong and have the ability to meet these challenges. Other systems are steadily reshaping themselves and increasing their focus on risk, although such reforms are likely to be long-term projects.
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