No Basel burden

The Monetary Authority of Macau says local banks will not face difficulties meeting the Basel III requirements. The new rules require lenders to raise the level of minimum reserves they hold and to improve the quality of the capital held. “As banks in Macau have been maintaining high quality capital components and rigorous risk management processes, their capital adequacy ratio has been at a level well above the international standard and hence the banking system is expected to well fulfil the new requirements,” the authority told Macau Business. The monetary authority “is always of the view that capital adequacy is the major foundation for the stability of the banking system and opines that the Basel III is a substantial strengthening of existing capital standards to improve the banking sector’s ability to absorb shocks arising from financial and economic stress.” Tougher requirementsThe Basel III rules are designed to reinforce the financial stability of banks and avoid them taking on excessive risks. The agreement will be phased in until 2019. According to the new rules, banks worldwide need to hold top-quality capital totalling 7 percent of their risk-bearing assets. The current requirement is set at2 percent. Top-quality capital is classified as stable assets that do not suddenly lose their value, as was the case during the subprime crisis of 2008. The new agreement was reached last month by the Basel Committee, a standard-setting body of central bank governors from 27 countries, ending months of wrangling. Hong Kong ready tooThe Hong Kong banks are also not expected to face difficulties in complying with Basel III requirements. The regulator there says the new rules will not have a significant impact on lenders in the former British colony. “Many Hong Kong banks already have a capital ratio that is higher than the new Basel III requirement,” said Arthur Yuen Kwok-hang, deputy chief executive of the Hong Kong Monetary Authority. “As such, I do not think banks in Hong Kong will be under pressure to raise capital over the next few years.” The Basel III agreement has caused little trouble for Asian banks where capital levels are typically well above the minimum standards set.In Europe and the United States, the new rules are likely to cause more pain, with many top banks expected to raise funds to meet the new requirements. Millennium BCP goes retailPortuguese bank Millennium BCP opened a Macau branch late last month after operating in the territory through a local offshore subsidiary. A retail license was granted in May. The bank plans to focus on the corporate market, providing loans to companies, institutions or individuals that plan to do business in African countries such as Angola and Mozambique. The local branch has eight employees but intends on doubling that number in two years, director José João Pãozinho told Portuguese news agency Lusa. Mr Pãozinho said business was “going very well so far and profits should increase around 20 percent”. Millennium BCP’s offshore subsidiary posted a profit of MOP48.7 million (US$6 million) last year. Millennium BCP is the biggest private Portuguese bank, with 4.3 million customers and 900 branches around the world. Banks want in on bond marketSome” local banks have told the monetary authority they are interested in investing in the mainland interbank bond market, the president of Macau’s de facto central bank, Anselmo Teng, told reporters. Mr Teng, however, did not mention any names. The People’s Bank of China, the mainland’s central bank, recently launched a trial programme in August that will permit overseas institutions, including Macau lenders, to invest in the mainland interbank bond market. The move is designed to promote yuan cross-border trade settlements.