Vietnam - Vietnamese banks vulnerable due to European debt crisis, Moody’s says

Moody’s, a rating firm, has highlighted five risks for Asia Pacific banks and said that the banking systems of Australia, New Zealand, South Korea and Vietnam are the most easily affected by economic and financial shocks resulting from European debt crisis in 2012.

The above assessment was announced on February 6.

Five risky scenarios, according to experts of Moody’s, are the spread of European public debt crisis, risk of China hard landing (an economy going into recession as the government attempts to slow down inflation), possible boom of the real estate bubble in Asia, slump of goods prices and standstill of the Australian property market. All of hidden risks may become really serious shocks to some regional banking systems.

Stephen Long, Moody’s Managing Director - Asia Pacific Financial Institutions said that this is not our major scenario. The aforementioned risks, even small, may appear and cause strong impacts needed to be watched within next 12 months.

Regarding the first risk, Moody’s reported that the banking systems of Australia, New Zealand, South Korea and Vietnam are the most vulnerable due to the crisis of Eurozone.

Based on its stress test, Moody’s made an assurance that profitability, deduction for loss prevention fund and capital source of Chinese banks are still a quite good buffer layer.

Citing Moody’s report, the sharp plunge of property prices in Asia generally will affect several regional banking systems.

In addition, the rating agency expected the impact of decreased prices of commodities to rating of nations is different. Hidden difficulties will mainly focus on goods export companies as well as be risks for intermediary processors.

Concerning the predicted standstill of the Australian property market, Moody’s remarked that Australian banks have been protected from direct affects of reduction in housing prices thanks to the low Loan to Valuation Ratio (LVR) and the usage of mortgage insurance.

VietBiz24

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