Crisis temporary, bank ratings to remain unaffected: Moody’s

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New Delhi, Oct 9 : Ratings of financial institutions will not be affected by the present financial crisis as the government support for these liquidity-constrained banks is providing the necessary cushion, says credit rating agency Moody’s.

“The intrinsic financial strengths of many banks remain solid,” Moody’s Chief Credit Officer Richard Cantor said, adding, “the current crisis is both temporary in nature and indiscriminate in impact on banks across different regions”. Moody’s Investors Services has termed the current confidence crisis as temporary but said that its ripple effect would be felt by all the banks globally. Saying that the government support to the liquidity constrained banks is a supportive factor for the banking sector as a whole, Moody’s said it would not, however, impact the ratings.

“The extension of support has not resulted in upgrades —and in some cases has not precluded downgrades—of the affected banks,” the report said.

However, the report stated the ratings on the government-supported banks may come under pressure if the support proves to be insufficient to deal with their problems and the circumstance revealed fundamental weakness in the banks’ asset quality or business model.

“We will continue to take selective rating actions on individual banks, if and when we conclude they have experienced enduring impairments such that their asset quality or funding stability is materially weaker than those of other banks that carry the same ratings,” Cantor added.