Moody's reviews 9 Malaysian banks for possible downgrade (ext: Edge)

Moody's Investors Service has placed the deposit and debt ratings of nine Malaysian banks on review for possible
downgrade.

Moody's said on May 20 the banks affected are AmBank (M) Berhad, CIMB Bank Berhad, CIMB Investment Bank Berhad, EON Bank Berhad, Hong Leong Bank Berhad, HSBC  Bank Malaysia Berhad, Malayan Banking Berhad, Public Bank Berhad, and RHB Bank Berhad.

"The review of their debt and deposit ratings will look at the extent to which Malaysia'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 Christine Kuo, a Moody's Vice President and Senior Analyst.

 

At present the deposit and debt ratings of the nine banks on review receive between one to five notches of systemic support, she said.

"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," Kuo said.