“Parental links often mitigate vulnerable standalone profiles,” the analysts say. They note that liquidity risks can be mitigated by parental support, although this support may be constrained by the banks’ rapidly growing balance sheet.
The majority of digital banks in Asia-Pacific (APAC) face higher credit risks compared to their incumbent competitors as they tend to focus on undeserved retail or unbanked market segments, a report by Fitch Ratings state.
However, in the report released on Oct 8, Fitch Rating analysts Tamma Febrian, Ruby Tsai and Peter Huang note that digital banks tend to charge higher loan interest rates to compensate for the higher default rates.
