Reuters reports that a senior official from the World Bank Group's private sector arm said that the Asia-Pacific region risks a damaging financial crisis from a surge of non-performing loans caused by rising insolvencies.

Alfonso Garcia Mora, Vice President for Asia and the Pacific of the International Finance Corp (IFC), said bankruptcies were expected to rise by 30% because of the economic crisis caused by the new coronavirus pandemic.

While many firms have been given moratoriums on their loan repayments, many central banks are not requiring financial institutions to regularly monitor these firms' solvency. This, said Garcia Mora, was "very dangerous".

"What can happen is that when the bank opens their books in six months, or in 12 months, they will realise that their non-performing loans ratio is not 2% but 20%," he said.

About 50% of firms will not have enough income to service their loans in the coming year, Garcia Mora said, citing an analysis by the World Bank and the Bank for International Settlements.

With a few exceptions, Garcia Mora said the region's judicial systems were unprepared for a leap in insolvency cases. There was also a lack of simplified methods for smaller firms to declare bankruptcy and start again, he said.