THE Asian banking landscape is 'nothing short of treacherous' and fraught with potential problems, Thomson BankWatch said. The agency said banks in China, Hong Kong and Indonesia faced the most pressing credit risks. In a strongly critical report, BankWatch analyst Andrew Seiz said yesterday that the Asian banking landscape was 'rich in opportunity, yet plagued by incalculable risk'. He said private banks were set to expand phenomenally in line with economic growth and the withdrawal of state banks, leading to asset growth rates of more than 100 per cent in a year for some, creating immense risk for others. The volatility in the short and medium term would bring some banking failures, he predicted. 'The diversity of regulations, economic development and government involvement among Asia's banking sectors is one manifestation of these risks. 'Liberalisation is being pursued with varying degrees of vigour and success.' In some cases, banks could no longer rely on previously explicit government support and guarantees, while banking authorities were themselves grappling with the implications of deregulation, he said. 'From Indonesia, where the sheer number of banks and their breathtaking growth translates into further banking failures being almost inevitable, to Korea where the commitment to openness is urgent yet equivocal, the regional landscape is nothing short of treacherous,' he said. Asia's banking sectors were generally in the infant stages of internationalisation, he said. 'Perhaps the most pressing regional credit risks arise for banks in China, Hong Kong and Indonesia. 'For China and Hong Kong, of course, this is associated less with the question of state involvement per se , as it is with the political uncertainty for which the realm of possible scenarios is countless. 'In Indonesia, the dust is still settling from the 1988 banking deregulation which enabled almost anybody with a small amount of capital to set up shop and operate a bank.' Long protected from competition, Asian banks had operated in a 'cosy environment and enjoyed fat margins with the government's not-so-hidden hand being not too far away in the event of a serious mis-step, especially for the larger players', he said. In many cases, public disclosure of their accounts was scant, and when disclosure was good, the accuracy 'and in certain cases, the truthfulness, is questionable', Mr Seiz said. For banks in the region there was 'at best, a very weak correlation between financial performance and overall creditworthiness'. Asian governments' share of banking assets was falling and their control was loosening, leaving banks facing enormous hurdles, Mr Seiz said. 'Operating for years as policy-driven development institutions, the new-found autonomy is almost daunting,' he said. 'This trend can most clearly be seen in Korea, where risk-based credit pricing is still in its infancy, and competition generated from interest-rate deregulation has compelled banks to turn to the stock market for alternative, yet extremely volatile revenue sources.' In Taiwan, 16 new banks established three years ago were encroaching on the territory of established banks, with similar competitive developments apparent in the Philippines and Thailand, he said.