Despite the plunge in Asian financial stocks this week on concerns over exposure to Fannie Mae and Freddie Mac, Asian banks will have limited risk from their holdings of securities issued by the US mortgage firms, Moody’s Investors Service said yesterday.
“While some regional banks and insurers hold substantial amounts of paper issued or guaranteed by either of the two institutions, the risk of interim mark-to-market income statement losses is low and of actual principal or interest payment loss miniscule,” Deborah Schuler, a Moody’s senior vice president, said in a statement yesterday.
“In addition, possible foreign exchange-driven losses, given the decline in the US dollar and the fact that Fannie Mae and Freddie Mac securities are US dollar-denominated, are mitigated by offsetting exposures at the banks,” she said.
Schuler’s statement came as the ratings agency released its latest report, Fannie and Freddie Threat to Asian Banks and Insurers Exaggerated.
The report follows a drop in investor confidence amid concerns that the problems at the two US companies could delay the recovery of the financial sector.
In Taiwan, the main bourse’s finance and insurance sub-index fell 7.82 percent this week, compared with a drop of 5.93 percent on the benchmark TAIEX.
With the exception of Australian and South Korean banks, Schuler said, most banks and insurance companies in the Asia-Pacific region are both liquid and sufficiently capitalized to cope with any loss-making investment securities.
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