The headquarter of ACLEDA Bank in Phnom Penh.(Source: Info-Prod Research (Middle East))
Moody's Investors Service has placed ACLEDA Bank Plc's (ACLEDA Bank) local currency long-term deposit and issuer ratings of Ba1 on review for possible downgrade. The bank's other ratings are unaffected and carry a stable outlook: its bank financial strength rating of D; foreign currency long-term deposit rating of B3; foreign currency long-term issuer rating of B1; and local currency and foreign currency short-term issuer and deposit ratings of non- prime. "The review of the ratings affected --local currency long- term deposit and issuer ratings of Ba1 (which include one notch of systemic support) -- will look at the extent to which Cambodia'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 Christine Kuo, a Moody's Vice President and Senior 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 Kuo. "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," says Kuo. "As such, Moody's will be reassessing the level of systemic support available for ACLEDA Bank to determine whether the systemic support it receives needs to be more closely aligned to the government's local currency bond rating of B2," says Kuo. Moody's will review the specific circumstances of Cambodia to determine the appropriate systemic support available for Cambodian bank ratings and the implications for ACLEDA Bank, which has been identified as being potentially affected. Factors that Moody's will consider -- in its assessment of systemic support -- are 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 system relative to the government's own foreign exchange resources, and changes to the government's political patterns and priorities. Moody's notes that during the recent global crisis, the Cambodian government has implemented a number of measures to ensure the stability of the banking system, including the establishment of a US$100 million emergency credit line for banks in need of temporary liquidity. At the same time, the credit stress evident in the banking system has increased somewhat as rapid loan growth has created liquidity shortages at some unrated banks and the weakening state of the economy has reduced the payment capacity of borrowers to some extent. Moody's notes that the review is unlikely to lead to a more-than-one notch change in ACLEDA Bank's local currency issuer and deposit ratings, which are under review. It expects to conclude the review over the next few weeks.
Moody's Investors Service has placed ACLEDA Bank Plc's (ACLEDA Bank) local currency long-term deposit and issuer ratings of Ba1 on review for possible downgrade. The bank's other ratings are unaffected and carry a stable outlook: its bank financial strength rating of D; foreign currency long-term deposit rating of B3; foreign currency long-term issuer rating of B1; and local currency and foreign currency short-term issuer and deposit ratings of non- prime. "The review of the ratings affected --local currency long- term deposit and issuer ratings of Ba1 (which include one notch of systemic support) -- will look at the extent to which Cambodia'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 Christine Kuo, a Moody's Vice President and Senior 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 Kuo. "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," says Kuo. "As such, Moody's will be reassessing the level of systemic support available for ACLEDA Bank to determine whether the systemic support it receives needs to be more closely aligned to the government's local currency bond rating of B2," says Kuo. Moody's will review the specific circumstances of Cambodia to determine the appropriate systemic support available for Cambodian bank ratings and the implications for ACLEDA Bank, which has been identified as being potentially affected. Factors that Moody's will consider -- in its assessment of systemic support -- are 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 system relative to the government's own foreign exchange resources, and changes to the government's political patterns and priorities. Moody's notes that during the recent global crisis, the Cambodian government has implemented a number of measures to ensure the stability of the banking system, including the establishment of a US$100 million emergency credit line for banks in need of temporary liquidity. At the same time, the credit stress evident in the banking system has increased somewhat as rapid loan growth has created liquidity shortages at some unrated banks and the weakening state of the economy has reduced the payment capacity of borrowers to some extent. Moody's notes that the review is unlikely to lead to a more-than-one notch change in ACLEDA Bank's local currency issuer and deposit ratings, which are under review. It expects to conclude the review over the next few weeks.
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