This is particularly significant for Singapore and Hong Kong as financial and trading hubs, where exports as a percentage of 2007 GDP was 186 per cent and 166 per cent respectively.
Second, disintermediation that reduced transparency and increased risk in the banking process will give way to the dominance of the universal banking model.
The renaissance of the classic banking model, commented Dominic Nixon, PwC east cluster financial services leader, where banks seek to retain a larger part of their origination and take on more responsibility for the due diligence to ensure credit quality will mean that Asian banks must remain on their path towards greater transparency and strengthen their risk management culture.
Many leading Asian banks are well capitalised and continue to enjoy access to inexpensive deposits from savers through local branch networks. They are well positioned to expand their origination and distribution activities.
The Structured Products market in Asia has been one of the fasting growing markets (more than 100 per cent annually since 2002) with new issuance in 2007 at approximately US$250 billion, according to survey statistics from Structured Products.
However, highly publicised cases in the region, including DBS High Notes 5 and Lehman Mini-bonds investments (originated by International Banks but distributed by local banks in Asia), have severely damaged investor confidence and revealed weaknesses in the product origination, distribution and compliance practices within the industry.
Despite this, the structured products business is not going to get smaller (in Asia), asserts Sandra Lee, head of retail structured products at Societe Generale Hong Kong, in Asian Investor. But the credit crisis will catalyse changes regarding distribution, product quality and investor education.
The industry can restore confidence by ensuring Corporate and Wealth clients that their best interests are the priority, notes Andrew Au, principal at AG Delta, a Singapore-based solutions provider to the capital markets and wealth management industry. To achieve this, the new financial services landscape will require business solutions that can manage a more sophisticated financial regulatory framework, while still efficiently and responsibly distributing financial products to the market.
Asian financial institutions that make early investments to meet these challenges will position themselves to capture the lion-share of opportunities as Asian Corporate and Wealth customers look for a back to basics approach to managing wealth and market volatility, adds Au.
Recent regional industry forums have focused their attention on Conventional Treasury and Islamic Financial products, two categories seeing a strong pick-up in demand as investors and corporates move away from less-understood complex investment products and hedging structures towards simpler yield enhancement and capital protected structures.