'Saudi Arabia will continue to advance reform agenda to ensure fiscal sustainability' Al-Jadaan attends 2021 annual meetings of WPG and IMF    KAUST, NCM sign agreements support two centers aimed to mitigate climate impacts in ME    Saudi, Chinese foreign ministers discuss developments in phone call    Saudi Pavilion in Expo 2020 Dubai achieves record number in daily visits    Sudden electrical failure causes cancelation of Haramain Railway trips for two days    Saudi Arabia scores highest regional progress in Maritime Connectivity Index    Crown Prince launches Strategic Offices for development of Al Baha, Al Jouf and Jazan    KAICIID chief underlines key role of religious and humanitarian institutions in confronting challenges    18 dead, dozens missing in floods in southern India after heavy rain    MoI, Saudi Exports participate in 2021 GITEX in Dubai    Harsh winter expected to bite Kingdom this year    SFDA wins 2021 UNIATF Award on prevention and control of NCDs    Social distancing stickers from all over Grand Mosque is being removed    AFC: Al-Nassr, Al-Hilal set for semi showdown in Riyadh    Ministry of Culture inaugurates BIENALSUR Contemporary Art Exhibition in JAX, Diriyah    Step up, urges WHO as figures reveal 1 in 4 adults don't exercise enough    Tributes pour in for killed Kenyan athlete    UN honors Henrietta Lacks, whose cells transformed medical research worldwide    Princess Reema named member of IOC Coordination Commission for Brisbane 2032    Sami's brace seals Saudi Arabia on 4th winning streak in World Cup qualifier Green Tops Group B    Saudis, expats mourn death of prominent Filipino preacher in Riyadh    Bollywood actor Sidharth Shukla dies at 40    Custodian of the Two Holy Mosques Directs KSrelief to Urgently Provide Malaysia with Medical, Preventive Equipment and Supplies to Address COVID-19 Pandemic    Custodian of the Two Holy Mosques Congratulates President of Maldives on Independence Day    Weather Forecast for Sunday    RSNF Commander Patronizes Ceremonial Launching of His Majesty's Ship "Jazan"    OIC Condemns Houthi Attempts to Target Civilians in Saudi Arabia    Philippines evacuates thousands as monsoon rains flood cities, provinces    Heavy rain in India triggers floods, landslides; at least 125 dead    U.S. Records 64,321 New Infections of Coronavirus    Without Fans, Tokyo Olympics Kicked Off    Pilgrims Perform Dhuhr and Asr Prayers at Arafat Holy Site    Dr. Mohammed Sulaiman Al-Jasser, Saudi Arabia's Pick to Chair IsDB Group for the next five years, unanimously approved by BoG Committee of Procedures    Saudi Press: Fitch affirms Saudi Credit Rating at "A" with a revised outlook to stable from negative    Handled Cargo at Saudi Ports Increases during June 2021    SDAIA, DARP & STC Launch Pilgrim's Smart Bracelet (NUSK)    Tabuk sculptor spends 8 years in carving entire Holy Qur'an on 30 marble slabs    2 Goals by Diaz Gives Colombia 3rd Place at Copa America    Legendary actor Dilip Kumar, 98, passes away, and with him an era    Saudi Cinema Night at Arab World Institute in Paris Kicks Off    KSU Leads Joint International Scientific Project for Early Detection of Breast Cancer    Saudi Arabia to Participate in Cannes Film Festival 2021    Arab Cup U-17 Championship Draw Saudi Arabia, Morocco, Palestine, Kuwait, in the 1st Group    AWI Hosts Saudi Cinema Nights in Paris    Brazil Beats Chile at Copa America Despite 2nd-Half Red Card    Council of Senior Scholars: Muslim Brothers' Group Don't Represent Method of Islam, rather only Follows its Partisan Objectives, Violating our Graceful Religion    Eid Al-Adha Prayer Performed at the Grand Holy Mosque    Pilgrims Perform Dhuhr and Asr Prayers in Arafat Holy Site    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Two Pakistani commercial banks' ratings downgraded?
Published in The Saudi Gazette on 15 - 08 - 2009

Moody's Investors Service Thursday downgraded ?the global local currency (GLC) deposit ratings of Habib Bank Ltd and ?United Bank Ltd to Ba3/NP from Ba2/NP in light of its global review of ?systemic support indicators for banking systems, thus concluding the ?review for possible downgrade of the ratings initiated on May 28, 2009.??
Earlier this month, Moody's published a Special Comment on its global?review of the capacity of governments and central banks to support their?banking systems entitled: “Financial Crisis More Closely Aligns Bank ?Credit Risk and Government Ratings in Non-Aaa Countries”, available on ?moodys.com.??
Consistent with the analytical criteria specified in the Special Comment?and given Pakistan's current situation and future prospects, Moody's has ?changed the systemic support input for Pakistani banks' ratings to B2 ?from the Ba2 local currency deposit ceiling (LCDC).
The new B2 systemic ?support anchor for Pakistani banks is one notch above the B3 local ?currency government debt rating.
Accordingly, the ratings of Habib Bank ?and United Bank, which had previously received a one-notch uplift from ?their respective Ba3 baseline credit assessments (BCAs) as a result of ?such support, have been affected. National Bank of Pakistan and MCB Bank ?Ltd have not been affected, despite Moody's assessment of a high ?probability of systemic support, since their Ba2 BCAs are at the same level as the Ba2 LCDC.?
?In the Special Comment, Moody's noted that the appropriate reference?rating for the capacity of a national government to provide support to?banks in a prolonged and widespread crisis would be aligned with or ?constrained by the government's own debt rating.
However, Moody's also?believes that this rating could be adjusted, usually positively, to ?reflect the non-fiscally-dependent measures that many central banks and ?governments can deploy to support banks.??In deciding whether the local currency-denominated deposits of a bank can ?be rated higher than the local currency-denominated debt issued by the ?national government due to systemic support, Moody's considers a number ?of factors for each banking system.
These are: the size of the banking ?sector relative to the government's resources; the level of stress in the ?banking system and in the economy; the foreign currency obligations of ?the banking system relative to the government's own foreign currency ?resources; political and historical patterns; and the possibility of any ?drastic shift in government priorities.??
Moody's regards the Pakistani banking system as having a dominant role in ?the country's financial market (despite the moderate ratio of banking ?system assets as a percentage of GDP). Moreover, the proportion of ?remittances that are channelled through formal banking channels has ?increased significantly over the past few years due to the crackdown on ?unofficial money transfers.??
The level of stress in the banking system and the economy has increased?during the worldwide recession and the sovereign position has ?deteriorated, as reflected by Moody's change in the credit outlook to ?negative from stable in Dec. 2008, indicating the likely weakening of ?the economic and credit environment.
Security threats are also a ?challenge to the country's stability, particularly from militants inside?Pakistan.??Moody's expects slower economic growth in Pakistan to lead to ?deterioration in the credit environment, with adverse asset quality and ?profitability implications for the rated banks.
Despite an improving ?trend over the past few years, asset quality has traditionally been a ?problem for the rated banks, weighing on their balance sheets and ?restricting rating upgrades. Furthermore, the expected slowdown in ?profitability, in conjunction with possible further market-to-market losses ?from the investment portfolio, could adversely affect the banks'?currently adequate capital levels.??


Clic here to read the story from its source.