Guest Astrrro Posted May 28, 2009 Posted May 28, 2009 BOT (Bank of Thailand)backs banks as Moody's threatens downgrade By ANOMA SRISUKKASEM THE NATION Published on May 28, 2009 The central bank yesterday rushed to reaffirm the sturdiness of the financial system and the country's credit posture after an international ratings agency threatened a near blanket downgrade of local banks. "I see no chance the banks will be in trouble," Deputy Governor Atchana Waiquamdee said. The banking system is sound, with a capital-adequacy ratio of 14.9 per cent in the first quarter, she said. Moody's Investors Service said in a release that was reviewing the debt and deposit ratings of 11 Thai banks for a possible downgrade. The banks are: Bangkok Bank Bank of Ayudhya Export-Import Bank of Thailand Government Housing Bank Kasikornbank Krung Thai Bank Siam City Bank Siam Commercial Bank, Standard Chartered Bank Thailand TMB Bank United Overseas Bank (Thai). "The review of their debt and deposit ratings will look at the extent to which Thailand's ability to provide support to its banking system, if needed, is converging with the government's own debt capacity as a result of the ongoing global economic and credit crisis," said Karolyn Seet, an assistant vice president and analyst. "Moody's believes that most governments are at least as likely, if not more likely, to support their banking systems as they are to service their own debt - a view that has traditionally led to bank ratings often benefiting from significant uplift due to systemic support. "However, as the financial crisis continues, the capacity of a country and its central bank to support its banks converges with, and is increasingly constrained by, the government's own debt capacity. "As such, Moody's will be reassessing the level of systemic support for the banks listed above to determine whether the systemic support they receive needs to be more closely aligned to the government's local-currency bond rating." Moody's will review Thailand's specific circumstances to determine the appropriate systemic support for its bank ratings and the implications for the 11 banks that have been identified as being potentially affected. Atchana also defended Thailand's ratio of public debt to gross domestic product (GDP). At 40 per cent, the ratio is lower than other countries in the region with the same credit rating, and it is still manageable even though the government needs to borrow more to shore up the economy, she said. "I don't think it will become a problem over the next few years, because it will not exceed 60 per cent of GDP," she said. Many countries have introduced expansionary fiscal policies to boost their economy. The Kingdom, however, has more room to adopt an easing policy without pressure, thanks to prolonged fiscal discipline. The public-debt ratio will rise, because of the government's mega-project investments, but efficient project investment will lead to high economic growth, which will eventually drag the ratio back down. "The public-debt ratio depends on whether economic growth is higher or lower than growth in interest rates," Atchana said. Factors that Moody's will consider in its assessment of systemic support include the size of the banking system in relation to government resources, the level of stress in the banking system, the foreign-currency obligations of the banking system relative to the government's own foreign-exchange resources and changes to the government's political patterns and priorities. Quote
