RETAIL BANKING | Cesar Tordesillas, Indonesia

Moody's questions Indonesia's ability to back up its banks

Moody's Investors Service has placed the ratings of ten Indonesian banks on review for possible downgrade.The banks affected are: Bank Central Asia, Bank CIMB-Niaga, Bank Danamon Indonesia, Bank Internasional Indonesia, Bank Mandiri, Bank Negara Indonesia, Bank Permata, Bank Rakyat Indonesia, Bank Tabungan Negara and Pan Indonesia Bank.The ratings affected are: all ten banks' global local currency (GLC) deposit; and the Ba2 foreign currency subordinated debts of Bank CIMB-Niaga and Bank Internasional Indonesia."The review of the debt and deposit ratings will look at the extent to which Indonesia's ability to provide support to its banking system, if needed, has changed in the midst of the ongoing global economic and credit crisis," says Beatrice Woo, a Moody's Vice President and Senior Credit Officer."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," says Woo."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," says Woo.

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