Here's proof that banks in Asia Pac are resilient amidst global financial crisis

But borrowers' leverage has increased.

According to Moody's, banks in Asia Pacific have been resilient in the wake of the global financial crisis and enjoy some of the highest ratings of banks globally. The rating agency notes that Asian banking systems have been operating in a favorable operating environment for an extended period, with low interest rates, robust economic growth and strong loan growth.

"However, during that period, borrowers' leverage has increased, asset prices have materially appreciated and, in the process, both borrowers and banks may have become more susceptible to asset quality deterioration, especially if the interest rate cycle turns" says Stephen Long, Managing Director for Moody's Financial Institutions Group in Asia Pacific.

Here's more from Moody's:

Moody's says that while it is difficult to exactly predict turning points in banking credit cycles, the increased likelihood of tightening of US monetary policy - with a higher probability of a tapering of quantitative easing during our outlook period - is a potential trigger.

"In this context, Moody's notes that the exit from loose monetary policies in the developed economies will test Asian banks' asset quality during the next 2-3 years," says Long.

There are also other factors more directly emanating from the Asia Pacific region that will influence the extent to which credit conditions could be pressured. Key among them are whether Abenomics in Japan will work as intended, China's economic rebalancing as well as Asian regulators' stance with regards to bank resolution regimes.

"We are further mindful that Abenomics will have an important impact on Japanese and Asian banks, but outcomes at this stage are uncertain. At the same time, we recognize that Japan's loose monetary policy compounds the effects, at a late stage of the credit cycle, of quantitative easings by the US and Europe," says Long.

"Moreover, exchange rate volatility - a side-effect of Abenomics - creates some asset quality challenges for banks in the region, while the behavior of Japanese banks internationally is another key consideration," says Long.