The Hindu Business Line : S&P leaves Indian bank ratings unchanged

STANDARD & Poor's (S&P) ratings services said today that it has revised its assessment of Government support for important banks in Asia. While S&P raised its counter-party credit ratings and issued credit ratings of 18 banks in Korea, Malaysia, Taiwan, and Thailand, the credit ratings of banks in Indonesia, India, and the Philippines have not been revised.

According to an S&P release, the reason for this is that the fiscal position of the Indonesian, Indian, and Philippine Governments are not as strong as those in Korea, Malaysia, Taiwan, and Thailand.

S&P, however, noted the willingness of the Indian, Indonesian, and Philippine Governments to support key banks in their systems may be no less than those of other Asian Governments.

The potential cost of supporting distressed banks continues to be treated as a contingent liability of a Government when S&P determines its credit ratings on sovereigns.

S&P estimates show that the Governments in Asia have extended well over $500 billion in support - direct and indirect - to domestic banks in their jurisdiction during the past decade.

The Chinese Government has extended the most in absolute terms, followed by Japan, Indonesia, Korea, Thailand, Malaysia, Taiwan, and India.

The revised credit rating of 18 Asian banks reflects the expectation that the Governments there are likely to provide extraordinary assistance in the event of such banks encountering distress.

Extraordinary Government support refers to the Government taking specific actions to rescue private sector banks that may have fallen into distress.

The extensive actions taken by the Governments of the Asian countries to support their respective banking sectors over the past decade, most notably during and after the 1997-1998 Asian financial crisis, are demonstrative of Government propensity to intervene in the financial sector to prevent bank failures, the release said.

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