BSP among interventionist regulators in Asia - S&P

 

 

By LEE C. CHIPONGIAN

The Bangko Sentral ng Pilipinas (BSP) is an "interventionist" banking sector regulator but "appears" to be evolving into a "supportive" central bank, Standard & Poor’s Ratings Services said in its teleconference yesterday.

In Asia, S&P said governments are classified as an interventionist, supportive or "support uncertain" for banks.

In its "Asia Banking Outlook and External Support on Banks" review, S&P Managing Director Ping Chew said BSP’s support, for example, includes providing liquidity or recapitalization of troubled banks — which makes it an interventionist central bank.

However S&P said the BSP stops short on giving blanket guarantee on bank deposits in times of financial crisis or trouble.

But like most emerging economies in the Asia-Pacific, BSP is classified as an interventionist regulator. Banks in an interventionist government are usually given higher ratings -— at least a notch higher — because of assured government support in times of crisis.

S&P credit analyst Ritesh Maheshwari said the financial stability of the Asian banking system has further improved on the back of strong economic growth and structural reforms. "For the first time (S&P) revealed the number of notches up it gives to the credit ratings on systemically important banks operating in countries which it classifies as "interventionist," where the government or regulator is highly likely to intervene directly and rescue a failing bank."

According to its "Asia Banking Outlook 2007-2008 Series" the region have improved the economies in general and the individual banking systems in particular. Maheshwari said, "Asian banks are now in a position to face impending challenges from a position of strength. (The) world has been enjoying an unusual period of growth that boosted the effects of those measures."

However, medium-term risks are still worth monitoring, said Chew. "With the credit cycle nearing its peak, however, Asia’s banking systems could face risks from a weakening US consumer demand, medium to high economic and industry risks, and unexpected shocks. Additionally, factors like rising interest rates, higher inflation, runaway asset prices, and the ever-present threat of avian flu pose immediate threats. Although risk management practices and regulatory environments have generally strengthened since the Asia financial crisis, an economic slowdown would be the litmus test for the systems’ structure and institutional strengths, even as most of them are highly likely to pass it."

S&P’s bank credit ratings are based on fundamental analysis that encompasses both institution-specific and systemwide factors, including external support.

 

http://www.mb.com.ph/BSNS2007042692670.html