Local lending not affected by US credit crash [1]
Wednesday, October 8, 2008 - 11:12. Updated on Thursday, September 11, 2014 - 15:10.
The lending capability of both the Westpac Bank of Tonga and ANZ Bank Tonga will not be directly affected by the current financial crisis in the USA.
The General Manager of ANZ Tonga, Arthur Hubbard said on Monday, that they had been spared a direct impact of the financial crisis because they raise funds through local customers deposits and lend all domestically, "our borrowing and lending funds are all in Tongan Pa'anga.
"This means we don't have to borrow from and are not reliant on any overseas borrowings to fund our lending book, which has caused major problems elsewhere. In addition, we have none of the sophisticated financial engineering products in the major financial markets, no hedging and no sub prime, so fortunately this means we are protected from the problems in US and elsewhere, which is good news indeed."
Volatile exchange rates
Despite the ANZ's partial insulation from this global financial crisis Arthur warned of a possible indirect negative impacts because of the current volatile overseas exchange rates, "and also any reduction in employment and income of Tongans living overseas could mean a drop in remittances home, but hopefully this will not be significant."
Arthur said that unrelated to the global financial crisis there is still a limited amount of liquidity in the banking system in Tonga, which means ANZ's new lending priorities will be targeted more towards the Government's economic priorities such as reconstruction, industries providing employment, and export industries rather than purely domestic and lifestyle borrowings.
"Funds are not freely available, although the liquidity squeeze we saw earlier in the year has eased somewhat in recent times. This liquidity issue has of course been a challenge in Tonga for a number of years and stems from domestic economic issues not related to the current world problems."
Westpac
The General Manager of Westpac Bank, Ashleigh Matheson said they too have steered clear from the financial crisis in the United States.
"This is because the Westpac Banking Group was not involved in the type of free and easy lending that drove property prices up in the US and resulted in the collapse of those credit institutions.
"In addition the bulk of Westpac's funds are generated locally so we have steered clear of the financial crisis," he added.
Ashleigh said that they had prioritised their lending to first time home buyers and construction.
Remittances
The Minister of Finance Hon 'Afu'alo Matoto said last month that Tonga was not directly affected by the credit crashes.
But he agreed it might affect the flow of remittances from Tongans who are living and working in the United States because the credit crash may affect their jobs.
The Minister said that remittances sent home by Tongans in the USA amounted to around $120 million pa'anga annually.