Moody's Investors Service has today placed on review for possible downgrade the global local currency (GLC) deposit ratings of three Lebanese banks (Bank Audi, Blom Bank and Byblos Bank). All other ratings assigned to these banks are not affected by this action."The review of the three banks' ratings will look at the extent to which the Lebanese government'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. At present
the GLC deposit ratings of the banks on review receive a one-notch uplift due to systemic support," says Stathis Kyriakides, a Limassol-based Moody's Assistant Vice President - Analyst, and lead analyst for these issuers.
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. However, as the financial crisis continues, the capacity of countries and their respective central banks to support their banks converges with, and is increasingly constrained by, each government's respective debt capacity. As such, Moody's will be reassessing the level of systemic support for the aforementioned Lebanese banks to determine whether the systemic support they receive needs to be further aligned to the government's local currency bond rating. Moody's will review the specific circumstances of Lebanon to determine the appropriate systemic support for Lebanese bank ratings and the implications for the three banks under review.
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'sown foreign exchange resources, and changes to the government's political patterns and priorities. The rating agency expects to conclude the review over the next few weeks.
Meanwhile, the BFSRs of Bank Audi, Blom Bank and Byblos Bank are unaffected as Moody's believes that their adequate capitalisation enables them to absorb a level of stress in line with Moody's expected loss assumptions.
The detailed ratings and actions are listed below:
Bank Audi:
- Bank financial strength rating of D- was unaffected and continues to
carry a stable outlook
- Long-term global local currency (GLC) deposit rating of Ba2 was placed
on review for possible downgrade
- Long-term foreign currency deposit rating of B2 was unaffected as it
remains constrained by Lebanon's foreign currency deposit ceiling and
continues to carry a stable outlook
- National Scale Rating of Aa1.lb was unaffected and continues to carry a
stable outlook
- Short-term local- and foreign-currency deposit ratings of Not-Prime
were unaffected and carry a stable outlook
Blom Bank:
- Bank financial strength rating of D- was unaffected and continues to
carry a stable outlook
- Long-term global local currency (GLC) deposit rating of Ba2 was placed
on review for possible downgrade
- Long-term foreign currency deposit rating of B2 was unaffected as it
remains constrained by Lebanon's foreign currency deposit ceiling and
continues to carry a stable outlook
- National Scale rating of Aa1.lb was unaffected and continues to carry a
stable outlook
- Short-term local- and foreign-currency deposit ratings of Not-Prime
were unaffected and carry a stable outlook
Byblos Bank:
- Bank financial strength rating of D- was unaffected and continues to
carry a stable outlook
- Long-term global local currency (GLC) deposit rating of Ba2 was placed
on review for possible downgrade
- Long-term foreign currency deposit rating of B2 was unaffected as it
remains constrained by Lebanon's foreign currency deposit ceiling and
continues to carry a stable outlook
- Foreign currency senior unsecured debt rating of B1 was unaffected as
it remains constrained by Lebanon's foreign currency debt ceiling and
continues to carry a stable outlook.
- Foreign currency subordinated debt rating of B1 was unaffected as it
remains constrained by Lebanon's foreign currency debt ceiling and
continues to carry a stable outlook
- National Scale rating of Aa2.lb was unaffected and continues to carry a
stable outlook
- Short term local- and foreign-currency deposit ratings of Not-Prime
were unaffected and carry a stable outlook
Moody's previous rating action on Bank Audi, Blom Bank and Byblos Bank was on 2 April 2009 when the rating agency upgraded to B2 from B3 the constrained long-term foreign currency deposit ratings of these issuers. Moody's also upgraded Byblos Bank's constrained foreign currency senior and subordinated bond ratings to B1 from B2.
