Local banks ‘least exposed’ to euro zone risks -- Moody’s

THE PHILIPPINE banking system is one of the least vulnerable in the Asia-Pacific to risks arising from a euro zone deterioration, Moody’s Investors Service yesterday said.

In a report assessing 16 countries, the debt watcher tagged the Philippines, along with Indonesia, as "least exposed" to a sudden euro zone slump.

Australia, New Zealand, Korea and Vietnam were in the "more exposed" category, primarily due to refinancing risks for the first three and a "relatively undiversified economy and weak financial system" for the latter.

Placed in the "exposed" bracket, meanwhile, were China, Japan, India, Malaysia, Hong Kong, Singapore, Taiwan, Thailand, Mongolia and Cambodia.

"Financial contagion risk to the Philippines is limited," Moody’s said.

"Its banking system’s foreign currency loan-to-deposit ratio is at a very comfortable 24%, showing abundant customer deposits. In addition, euro area banks’ foreign claims on the country are relatively small," the debt watcher added.

"However, the sharp weakening in 2011’s export performance is a warning that the banks may see a worsening in the debt-servicing capabilities of exporters," it continued.

In a related report, Moody’s noted five risk scenarios for Asia-Pacific banks, with contagion from the European sovereign crisis topping the list and described as a "pressing" concern.

The level of concern for the rest -- a hard landing for China, the bursting of real estate bubbles in Asia, a commodity price downturn and an Australian property market decline -- was described as "modest".

The Philippines, Australia, Indonesia, Malaysia, Mongolia, New Zealand and Vietnam were said to be vulnerable to a commodity price downturn but Moody’s said the potential of this situation developing was "low."

"While the Philippines is not a commodities exporter, its banking sector has substantial exposure to the agriculture and energy sectors, which account for a combined 18% of system loans," the debt watcher said.

Banks in the Asia-Pacific region, said Moody’s, performed "remarkably well through more than three years of financial turmoil" and this resilience is expected to continue.

Risks have increased, however, thus its examination of low-probability but potentially high-impact outcomes.

Comments

Popular posts from this blog