Thailand’s outlook stable
(21 May 2010 – Asia) Moody's Investors Service has said it is maintaining its stable outlook on Thailand's banking system despite the recent escalation of violence in the country.
The ratings agency said in a statement that the sector's asset quality and earnings had shown considerable resilience to political turbulence in recent years.
Moody’s said its base case is that the banking system remains capable of managing, without deeply compromising its capitalization, any incremental losses due to the country's political turmoil.
However, said that the ratings agency would be closely monitoring the impact of the current disruptions on exports and economic activity more generally since lengthy delays to the restoration of transport communications would eventually have a negative impact on many borrowers' cash-flows.
Earlier in January, Moody's had changed the system's fundamental credit outlook to stable from negative, reflecting the prevalence of favourable credit conditions in the country.
At the same time, Moody's had noted that the sector's ability to withstand the adverse effects of the global financial crisis could be fractured by Thailand's fragile political situation, a result of the tension between the government and anti-government forces.
Moody’s assistant vice president and analyst, Karolyn Seet said that the banking system had instead demonstrated these past few months its resilience and it will continue to benefit from the country's expansionary budget and stimulus program.
Indeed, the system has in the recent past weathered a coup, that in September 2006, and various other events since then, added Ms Seet.
Analysis by Moody's shows that Thai banks' stand-alone ratings are capable of withstanding material impairments to asset quality and earnings, relative to the system's present capitalization levels and reserve position, even though the full effects of the anti-government protests are currently undetermined, the ratings agency noted.
Moody’s said its base case is that the banking system remains capable of managing, without deeply compromising its capitalization, any incremental losses due to the country's political turmoil.
However, said that the ratings agency would be closely monitoring the impact of the current disruptions on exports and economic activity more generally since lengthy delays to the restoration of transport communications would eventually have a negative impact on many borrowers' cash-flows.
Earlier in January, Moody's had changed the system's fundamental credit outlook to stable from negative, reflecting the prevalence of favourable credit conditions in the country.
At the same time, Moody's had noted that the sector's ability to withstand the adverse effects of the global financial crisis could be fractured by Thailand's fragile political situation, a result of the tension between the government and anti-government forces.
Moody’s assistant vice president and analyst, Karolyn Seet said that the banking system had instead demonstrated these past few months its resilience and it will continue to benefit from the country's expansionary budget and stimulus program.
Indeed, the system has in the recent past weathered a coup, that in September 2006, and various other events since then, added Ms Seet.
Analysis by Moody's shows that Thai banks' stand-alone ratings are capable of withstanding material impairments to asset quality and earnings, relative to the system's present capitalization levels and reserve position, even though the full effects of the anti-government protests are currently undetermined, the ratings agency noted.
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