Asia regulators move to shore up confidence as banking concerns mount

© Reuters. FILE PHOTO: The downtown skyline is seen following the coronavirus outbreak in Sydney, Australia, March 18, 2020. REUTERS/Loren Elliott

By Lewis Jackson and Selena Li

SYDNEY/HONG KONG (Reuters) -Asian policymakers and regulators sought to reassure investors on Thursday about the resilience of their banking systems and played down contagion risks after a crisis of confidence in the global banking sector triggered a market sell-off.

A plunge in shares of Credit Suisse on Wednesday sparked fears of a full-blown banking crisis. The bank on Thursday announced it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss central bank.

The Credit Suisse development came a week after the collapse of a start-up lender in California.

Australian Treasurer Jim Chalmers on Thursday said that local banks were well capitalised. He had convened a meeting this week between major regulators and the central bank after the collapse of Silicon Valley Bank.

    "Our regulators are on top of things, our banks well-capitalised with strong liquidity positions, but it's still a reminder of the risks, uncertainties and vulnerabilities in the global economy as interest rates rise," said Chalmers.

    He made no mention of Credit Suisse, shares of which tanked by up 30% on Wednesday before it was given access to a liquidity lifeline by the Swiss National Bank (SNB).

The Hong Kong Monetary Authority (HKMA), the city's de facto central bank, said it had been monitoring developments in overseas financial markets and that it would "maintain close dialogues with relevant overseas supervisory authorities".

Responding to a Reuters query on the Credit Suisse stock collapse and wider market vulnerabilities, Hong Kong's securities watchdog said it was "closely monitoring the situation to assess the impact" on the city's market.

The Securities and Futures Commission of Hong Kong said it has "maintained close dialogue with other financial regulators" and the Hong Kong stock exchange on this matter.

The head of Japan's banking lobby, meanwhile, said there were no signs at the moment of the Japanese financial system being affected by a crisis of confidence in Credit Suisse, adding that the country's banks are well-capitalised.

In South Korea, the Financial Services Commission (FSC), said it was considering having its banks hold more capital to prepare for instability.

Its statement said it was considering raising the countercyclical capital buffer (CCyB) ratio from the current zero percent as early as the second half of this year.

The CCyB is designed to be adjusted to create buffers that strengthen the resilience of the banking sector during periods of stress.