The Hindu Business Line : `Asia needs to focus on consolidation of banks'

Priority for Asian countries should be the development of a strong banking sector, said Mr Michael Rees, CEO, Wholesale Banking, Standard Chartered Bank.

"Consolidation among domestic banks can help strengthen banking industry in Asian countries. The regulators should allow foreign banks to come in and lay down terms and conditions that will not affect the local players," he said.

Mr Rees was speaking at the 21st Annual General Meeting of the International Swaps and Derivatives Association, held in Singapore.

In India, the banking sector comprises 90 per cent of domestic players, while in China it is 97 per cent. In Korea, the Government had encouraged consolidation among local players and it had done well. Malaysia was also doing a good job of forcing consolidation, he said.

Foreign banks

Foreign banks can play an important role in deepening and strengthening the financial market. They can facilitate trade flows in and out of the country, help develop the capital market and help the international aspect of the economy, he said. About rising interest rates, Mr Rees said it was a relatively benign cycle. "Where the global economy has been able to absorb the doubling of oil prices, a rise of 20-25 basis point in interest rates is not high," he said.

When asked about the lack of credit derivatives in India, Mr Rees said regulatory hindrances were a major reason. "Another problem is the vibrant liquidity, due to which the secondary market is not well developed. Therefore, credit derivatives have not developed," he said.

Mr Akash Mohapatra, Director and Senior Legal Counsel, Asia, Deutsche Bank AG, said hopefully the draft Bill on derivatives may be passed by Parliament next month. "ISDA has submitted its report to Parliament and there is a strong push to pass it," he said.

The Finance Minster had also given his commitment to getting the Bill passed in his Budget speech, in March 2005, Mr Mohapatra added.