LIQUIDITY CONUNDRUM IN ASIAN BANKS

Asia and the Pacific region remain at the epicentre of global growth, contributing 70% of the world economy's growth. Unfortunately, despite being a driving force, Asia struggles with inflation, financial vulnerabilities, and liquidity droughts due to the global economic slowdown.

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Rising inflation, the Russia-Ukraine war, high-interest rates, and a disbalance of demand and supply force the economy to hit rock bottom. Consequently, Asian banks are struggling with liquidity constraints even after demand expansion in 2024. According to the World Economic Forum, slowing down global economic growth will prevail, as per top Asian banks, due to a worsening financial outlook, geopolitical situation, and the risk of recession.

In the banking sector, scarce liquidity doesn't appear promptly. Still, numerous factors shape the condition, such as high loan demand, economic downtime, default loans, decreased asset quality, turbulent financial markets, and operational issues. The global economic slowdown raises a wider profile of credit risk for Asian banks. Recently, US and European banks have faced setbacks with rising credit rates and contagion risks.