A key feature of transacting and building relationships with global banking brands in India is to note their reflexivity to pressures in Europe that gets limited to Sout East Asia and China and never impacts us in India. Most likely the current european banks deleveraging is also expected to go along the same lines.

While Middle East and Central Asia have long been given away to their culturally more akin regions in Africa for all Deals and management control globally in the Banking and Finance markets, even in Asia ex Middle East and Japan the two distinct splits of China and SE Asia  North Asia incl Taiwan, Hongkong and Korea and India and south Asia continue to move on distinctly independent lines. The banking business of HSBC and Stanchart for example , who are not delevraging that frantically, business is infact booming in China and remains dull in India in corporate and investment banking business. Those that are delevraging however would bve critically taking a call on Asia assets that total $560 bln of the $3 tln in lending assets of European banks.

While 40% of the deleveraging that banks need will be eked out of Risk optimization, changing risk weights of categories like manufacturing and even Geographic exposures and thus reducing RWA, the rest will be real deleveraging by selling down existing credit assets and reducing probability of considering new credit business in Asia. The required $300 bln in deleveraging, ostensibly over 5 years and more could come faster out of intractable portfolios in Asia if and when a choice arises for these European banks  as BNP , Credit Agricole and SocGen or thse deleveraging or sghtting down exposures in the market book like Credit Suisse

In the melee, it is unlikely that the 10% market share of the Foreign banks in India is hurt much though it is unlikely that they would readily incorporate RBI's concerns about having grown off balance sheet or transaction exposures without committing to real lending in the country. 

The impasse over the impractibility of transferring extra licences from the RBS sale to HSBC who has made the purchase continues in a stalemate , abanks noting they would abide by RBI's direction

 

Posted via email from The India Investment Post