Fitch: APAC non-bank growth brings benefits and risks

The US-based rating agency, Fitch ratings, came out with its latest review of the APAC non-bank financial institutions (NBFIs) on Thursday.

Key Points:

“Non-bank financial institutions (NBFIs) are playing an increasingly significant role in financial intermediation in a number of Asia-Pacific (APAC) markets, with rapid growth over the last five years spurred by tighter regulation of banks, the low interest environment and technological development. 

Fitch Ratings expects these factors to continue to support strong growth over the next couple of years, although interest rate normalisation and greater regulatory scrutiny of NBFIs in some APAC markets could create headwinds in the medium term.

Policymakers in some APAC markets have encouraged NBFI development as a way to address this problem and promote financial inclusion. NBFIs can also diffuse credit risk across the financial system. 

However, NBFIs can also add to risks in the financial system if they are overly reliant on short-term wholesale funding, lack transparency or grow at an excessive rate.”