Gov’t support dispels big impact of new rating criteria to AsiaPac banks

Since Nov. 29, 2011, Standard & Poor’s has applied its revised rating criteria to 126 bank groups in the Asia-Pacific region and published the ratings via group media releases and individual reports. Including the subsidiaries, a total of 208 entities were covered. The report provides an analysis of the implementation of the revised bank criteria in the region. The following themes emerge from the application of the revised criteria:

• The impact on the issuer ratings on Asia-Pacific banks is smaller than that for the global banking industry.

• We lowered the ratings on a number of Australian and New Zealand banks, as they were materially influenced by the Banking Industry Country Risk Assessment (BICRA) scores in these banking systems, which contribute to the anchor for any bank rating under our revised criteria.

• The positive rating actions in China, Japan, Korea, Singapore, and Hong Kong factor in the recognition of strong support from these highly supportive governments.

• Sovereign risks are affecting bank creditworthiness through several areas of our revised methodology.

• We see funding and liquidity as an area of relative strength for the region.

• The outlooks on 79% of the banks in the region are stable under the new criteria, sustained by their satisfactory capital and earnings and liquidity, although Asian banks will not be immune to the impact of developments in the global economy and debt crisis in Europe.

The rating actions reflect a recalibration of Standard & Poor's views of the banking sector via the application of the new criteria rather than any material change of creditworthiness of the industry.