At the current juncture, it is expected that the fall out from the US sub prime crisis is likely to be limited for Asian banks and can easily be accommodated within their current rating positions. According to Moody’s, exposures of Asian banks have book values that do not exceed 10-35 per cent of annual pre-tax pre-provision profits.
However, this remains well below the averages of the 2000s. There are also growing questions about macroeconomic stability given the weakening of fiscal positions in a number of low income developing countries (LIDCs) in recent years. According to the IMF, debt burdens and vulnerabilities of LIDCs have risen significantly since 2013, reflecting a mix of factors, including exogenous shocks and loose fiscal policies.