Japanese & Australian Banks: Moderate Exposure to China, Hong-Kong and Taiwan

DBRS Morningstar has released a commentary focusing on Japanese and Australian banks’ exposures to China, Taiwan and Hong Kong.

Key points include:

• In a scenario of an escalation in tensions surrounding Taiwan’s status, indirect risks could have some implications for Japanese and Australian banks as they have some operations in these regions.

• The total credit exposure of Japanese and Australian banks to China, Hong Kong and Taiwan is moderate representing a relatively low proportion of consolidated credit exposures.

• However, for the three largest Japanese banks, exposure to these regions represent a significant proportion of the banks’ Common Equity Tier 1 (CET1 ) capital.

“The large Japanese and Australian banks’ exposures to China, Taiwan and Hong Kong appear manageable, notes Maria Rivas, Senior Vice President, DBRS Morningstar. “Moreover, it remains important to note that Japanese and Australian banks have funding strategies and continuity plans in place to prevent disruption in the event of an escalation of tensions between China and Taiwan.”