The following is a statement from Moodys Investors Service.

Moody's: Bank Credit Quality in Asia Pacific Has Likely Reached a Cyclical
Peak



Hong Kong, July 16, 2013 -- Moody's Investors Service says that banks in
Asia Pacific - against the backdrop of generally strong fundamentals -
have likely reached a cyclical peak.

Moody's highlights that banks in Asia Pacific have been resilient in the
wake of the global financial crisis and enjoy some of the highest ratings
of banks globally. The rating agency notes that Asian banking systems
have been operating in a favorable operating environment for an extended
period, with low interest rates, robust economic growth and strong loan
growth.

"However, during that period, borrowers' leverage has increased, asset
prices have materially appreciated and, in the process, both borrowers
and banks may have become more susceptible to asset quality
deterioration, especially if the interest rate cycle turns" says Stephen
Long, Managing Director for Moody's Financial Institutions Group in Asia
Pacific.

Moody's says that while it is difficult to exactly predict turning points
in banking credit cycles, the increased likelihood of tightening of US
monetary policy - with a higher probability of a tapering of quantitative
easing during our outlook period - is a potential trigger.

"In this context, Moody's notes that the exit from loose monetary
policies in the developed economies will test Asian banks' asset quality
during the next 2-3 years," says Long.

There are also other factors more directly emanating from the Asia Pacific
region that will influence the extent to which credit conditions could
be pressured. Key among them are whether Abenomics in Japan will work as
intended, China's economic rebalancing as well as Asian regulators'
stance with regards to bank resolution regimes.

"We are further mindful that Abenomics will have an important impact on
Japanese and Asian banks, but outcomes at this stage are uncertain. At
the same time, we recognize that Japan's loose monetary policy compounds
the effects, at a late stage of the credit cycle, of quantitative easings
by the US and Europe," says Long.

"Moreover, exchange rate volatility - a side-effect of Abenomics -
creates some asset quality challenges for banks in the region, while the
behavior of Japanese banks internationally is another key consideration,"
says Long.

"Meanwhile, with Chinese banks, because the Mainland's economy is now
rebalancing and its growth is slowing, we are seeing negative pressures
on asset quality, profitability and liquidity management. Part of these
pressures also comes from concerns over the risks associated with the
shadow banking sector and local government financing vehicles," says
Long. "The debt related to both sectors is large, despite government
attempts to rein it in."

"In terms of specifics, Moody's expects the asset quality of Chinese
banks to deteriorate, particularly in terms of their lending to
export-related industries located in coastal regions," adds Long. "But in
our base case sceneario, the banks will avoid a hard landing, and will
also have no problems meeting Basel III. And their internal capital
generation will be enough to support mid double-digit loan growth."

"And with the ASEAN banks, while we expect them to remain resilient by
and large, we note that downside risks are increasing, and these growing
risks to economic and financial stability are driving diverging outlooks
for the region's banking systems," says Long.

"In terms of continued supports, ASEAN banks face expanding markets as
domestic wealth continues to rise, and they have also been improving
their profitability and capital buffers against any weakness in asset
quality and liquidity," adds Long.

"And finally, another key question is whether Asia Pacific remains
unaffected by the global shift towards burden-sharing in bank resolution."

Long was speaking at Moody's annual Asian Banking Conference in Singapore
held on Tuesday, July 16, which will also be held in Hong Kong on
Thursday, July 18.

For any media enquiries, please contact:

Hector Lim

Vice President, Communications

hector.lim@moodys.com

+61 2 9270 8141

Eleanor Sheung

Assistant Vice President, Communications

eleanor.sheung@moodys.com

+852 3758 1424