If Asia's banking industry is to become globally competitive, it must ensure that non-performing loans (NPLs) volumes remain manageable and do not become a recurring issue, Deloitte said in its latest report on banking released here Thursday.

The growing regional presence of major global banks is motivating Asia's bank to position themselves more competitively by restructuring there lending operations and disposing of NPLs, said the report.

Deloitte's research has identified three primary areas, namely, corporate governance, credit risk management and capitalization, with focus on preventing the recurrence of NPLs and addressing structure deficiencies.

"It is the combination of underdeveloped regulatory environments and weaker corporate control mechanism that continues to make Asian banking markets vulnerable to external shocks," said Steven Butter, Deloitte's regional managing partner,

He said proper management of a bank's credit portfolio requires a corporate culture with a high degree of awareness of credit risk, which include the appropriate people, processes and systems to adequately manage lending risk from origination to payment recovery and workout.

He said China is becoming more active in the disposition of NPLs and also starting to address the structural deficiency that let to these NPLs.

"If banks continue to improve their risk management and oversight, the financial profile of the sector could improve drastically," said Butter.

According to him, Asian banks have a distinct advantage in seizing many of the vast opportunities in Asia if they are able to reform quickly to improve their lending practice and oversight.

Source: Xinhua