BoT confident of Thai banks strength, despite possible Moody’s downgrade

BANGKOK, May 27 (TNA) – Thailand’s commercial banks still enjoy stable financial positions despite a likely move by Moody’s Investors Service to place the debt and deposit ratings of 11 domestic banks in Thailand on review for possible downgrade, but it will not affect them negatively, Bank of Thailand (BoT) deputy governor Atchana Waiquamdee said on Wednesday.
 
Commercial banks in Thailand have a very solid positions as the capital adequacy ratio required by the Bank for International Settlements (BIS) standard is as high as 14.5-15 per cent, Mrs. Atchana said.
 
Also, governmental assistance remains significant with the public debt now amounting to 40 per cent of gross domestic product (GDP), which she held as not high when compared to other countries sharing the same credit ratings with Thailand.
 
Even if public debt rises to 60 per cent of GDP in the next few years, the country would not be affected due to its sound financial position, Mrs. Atchana said.
 
Her comments were made after Moody’s earlier in the day issued a press release saying that it would review for possible downgrade 11 banks in Thailand, including Bangkok Bank, Bank of Ayudhya, Export-Import Bank of Thailand, Government Housing Bank, Kasikornbank,  Krung Thai Bank, Siam City Bank, Siam Commercial Bank, Standard Chartered Bank Thailand, TMB Bank and the United Overseas Bank Thailand.
 
“The review of their debt  and deposit ratings  will look  at the extent to which Thailand’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,”  says Karolyn Seet, a Moody’s Assistant Vice President and Analyst.
 
“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 Ms. Seet.
 
Factors that Moody’s will consider in its assessment of systemic support include  the size of the banking system in relation to government resources, the level of stress in the banking system, the foreign currency obligations of the banking systems relative to the government’s own foreign exchange resources, and changes to the government’s political patterns and priorities. (TNA)