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Stuart Gulliver, chief executive of HSBC, warned on Tuesday that Asia is facing the threat of a potential slowdown in the flow of credit to the region, especially from beleaguered European banks.
Many Asian nations depend on foreign banks for a large chunk of their funding, raising the prospect of a credit crunch as cash-starved foreign banks either retrench or raise the price of their loans.Continental European banks were responsible for 21 per cent of the $2,520bn of international bank loans outstanding in Asia excluding Japan as of the second quarter of 2011, according to the Bank for International Settlements.“The strong increases in credit availability in Asia that has supported demand growth cannot continue indefinitely,” said Mr Gulliver, who was speaking in Hong Kong the day before his bank announces its third-quarter results.…However, they warn that lending could plunge if the eurozone crisis spins out of control. “Any move to shut off the emerging market credit spigot could have powerful knock-on effects on domestic demand growth,” JPMorgan warned in its latest Global Data Watch last week, referring to emerging markets in Latin America and Europe as well as Asia. “Emerging market economic growth has been fuelled by rapid bank lending.” Financial Times – HSBC chief warns of Asia credit crunch