Banks in South Korea, New Zealand and Australia are among those that are most susceptible to the European debt crisis, because lenders in these countries get much of their funds for their loan book from global capital markets, said rating agency Moody’s.
"If we don’t see the banks maintaining the maturity profile of their funding book by going and tapping that market in a big way in the next three or four months… it could eventually become a rating issue for those banks," said Deborah Schuler, group credit officer of Moody’s in Africa, Asia and the Middle East.
However, the agency said lenders still have a substantial buffer to moderate potential difficulties temporarily.
As for the other parts of Asia, the agency believes that financial institutions are mostly healthy, with most banks having non-performing loan ratios of below five percent.
Moody’s also said that the vast Chinese economy may stabilise regional economies.
However, with Asia’s attractiveness and stability post-financial crisis, the agency said it does not anticipate that hot foreign money will become an issue.
"Malaysia has had some sort of restrictions making it difficult to take money out quickly for some time. We now see Indonesia addressing foreign currency risk in particular. Korea is taking some measures that mute the effect of that, and we think that is positive for them, that they get quality capital flows," said Schuler.
Banks need to observe their liquidity carefully in the following months, as governments start to withdraw stimulus measures carried out during the financial crisis, said Moody’s.