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This blog is brought to you by Gilbert & Samuels Company Limited, a financial advisory services and consulting company based in Suva, Fiji.
To contact the authors of this blog, please call telephones (679) 3342719, (679) 3544897 or e-mail info@gilbert.com.fj.


Friday, May 08, 2009

US Bank Stress Tests and Implications on Fiji banks and potential investors

The largest 19 banks in the US have been subject to stress tests by the regulators there over the past few weeks.

The tests have been the outcome of the continuing impact of the financial crisis that has started from the US and has now spread to the other parts of the world.

Over the recent months, a large number of banks in the US have failed from inadequate provisions made for loans that have continued to default from the large mix of hybrid lending products and loan securitisation that had grown rapidly in those banks since the mid 1990s.

Here are some of the comments that have been raised regarding those stress tests. And here are some leaked results.

The impact that these tests have on us here is that there will be an opportunity to invest or buy into those banks that have need for additional capital.

Also our local banks can see as to the financial status and performance of their correspondent banks overseas, particularly if they are dealing directly with some of the 19 largest banks that have been subjected to the stress tests.

Thirdly, those that have no need for additional capital would show everyone that they have had good systems and controls in place prior and now during the financial crisis promoting confidence in them and indirectly in the financial sector, not only in the US but around the world as well. [Since the onset of the global financial crisis, there has been much criticism as to the role played by the financial sector and regulatory authorities.]

Those banks that will need additional capital will require closer scrutiny to see whether the faults are attributed to their own mismanagement or lax decision making or are a direct result of other wider financial sector issues.

Note : If you need investment advice or portfolio management services, do call our office on (679) 3342719 or email info@gilbert.com.fj. We also carry out consultancies on areas relating to the financial sector in Fiji and can also conduct or assist with similar work in the Pacific Islands region.

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