FIRST SG FREEZES ASSETS OF RUSSIAN FINANCIAL INSTITUTIONS PAYMENTS
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he Monetary Authority of Singapore (MAS) has prohibited financial institutions (FIs) in its jurisdiction to do business or offer financial services to four Russian entities, the Russian government, the Central Bank of the Russian Federation, and Ukraine’s breakaway regions of Donetsk or Luhansk. Financial entities sanctioned include VTB Bank Public Joint Stock Company, Promsvyazbank Public Joint Stock Company, Bank Rossiya, and Vnesheconombank (The Corporation Bank for Development and Foreign Economic Affairs). Singapore-Russia transactions FIs in Singapore are also barred from doing business with the Russian government and the Central Bank of the Russian Federation. This includes purchasing, selling, providing financial services for, assisting in the issuance of, or dealing with securities or certificates of deposit issued by Russia’s government or central bank. Banks are also ordered not to enter into financial transactions or provide financial services to Donetsk and Luhansk. Singapore FIs are further prohibited from establishing any new business relations, undertaking or entering any financial transaction, providing financial assistance, or transferring financial assets as well as “other assets or resources” with the four banks. FIs who have possession, custody, or control in Singapore of any funds or assets owned or controlled directly or indirectly by the four banks were ordered to immediately freeze them. They are also asked to ensure that such funds, financial assets, or economic resources are not made available to the sanctioned banks. 6 ASIAN BANKING & FINANCE | Q2 2022
New bank lending in China fell “more than expected” with aggregate finance dropping to CNY2.37t
Relaxed policies boost China’s new lending LENDING & CREDIT
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elaxing monetary policies gave a little boost to new lending in China as banks remained cautious over concerns regarding credit quality–and any further cuts may not be enough to alleviate concerns, according to a report by the financial institution ING. New bank lending in China fell “more than expected” in December 2021, with aggregate finance dropping to CNY2.37t from CNY2.61t in November of the same year, according to the report. New yuan loans also fell to a total of CNY1.13t from CNY1.27t in November. The fall happened despite the central bank cutting reserve requirement ratios (RRR) by 0.5 percentage points (ppt) and interest rates by 5 basis points around the same period. The small growth in credits shows that despite cuts to RRR and interest rates, banks are reluctant to lend as their concern is more about credit quality, according to ING’s Iris Pang, chief economist, Greater China. “This is because several big
A loosening monetary policy may not boost economic activity
corporations have recently defaulted. Though the default entities are mostly real estate developers, the risk is increasing to the suppliers, mostly in the industry of construction materials,” Pang said. Demand for loans is mostly affected by real estate. The sector is likely bracing for more woes to come their way in the next few months, with the deleveraging for real estate developers likely to remain in force over the year. ING believes that this will end up as a merger and acquisition activity to reduce debt ratios for the most heavily indebted real estate developers. Stateowned enterprises (SOEs) will replace some private-owned enterprises across the industry. If loans continue to experience a monthly decrease, Pang noted that the government may need to send out “a clearer message” to banks. “If risk awareness is on the top of the list of banks’ concerns, then further RRR and interest rate cuts may not yield a result of more credits. That means that even a loosening monetary policy may not boost economic activity,” Pang said. We may also see a return to the old days when banks lent to SOEs, which are supposed to be better in terms of repayment ability, Pang added. On the upside, the economy is expected to extend its growth streak in 2022, which should give banks some relief from any unexpected pandemicrelated drawbacks. China’s economy grew 8.1% for the full year 2021, partly due to the low base growth of only 2.2% in 2020. It is forecasted to grow another 5.4% for the full year of 2022 on the back of stronger industrial production and the rise of retail sales. Both exports and imports also grew by around 21%, and ING expects trade to keep its momentum in 2022 as global growth is expected to be better this year. A hidden gem amongst industries, is the investment in advanced technology, according to ING. This is partly the result of the land-mine that is the USChina relationship. “As the US is restricting technology exports to China that can find a dual-use for military and commercial purposes, China has had to invest to build up its own capacity in advanced technology. This is an arena that has the potential for very high growth,” ING said.
