Lebanon bank vulnerability low: Fitch
Unchanged since 2013, MPI score puts banking sector with U.S., Saudi Arabia
BEIRUT: International rating agency Fitch said Lebanese banks have a similar vulnerability level as United States, Germany and Saudi Arabia.
Fitch made the evaluation in its semiannual risk assessment of 114 banking systems in developed and emerging economies.
“Fitch Ratings placed Lebanon’s banking sector among 77 banking systems with a low level of potential vulnerability, the highest category on Fitch’s Macro-Prudential Indicator,” according to Lebanon This Week, the economic publication of the Byblos Bank Group.
The MPI identifies the buildup of potential stress in banking systems due to a specific set of circumstances.
“It [MPI] aims to highlight potential systemic stress that could materialize up to three years after an early warning is first detected. As such, it identifies instances of rapid real credit growth over successive twoyear periods, along with growth in real property prices, an appreciation in the real exchange rate or a rise in real equity prices. Its assessment is based on three years of annual data, with a trigger in any of the three years determining a country’s MPI score,” the publication explained.
Fitch said Lebanon maintained an MPI score of 1, a score that means the banking sectors under this category have low potential vulnerability, while score 2 reflects moderate vulnerability, and score 3 is considered a high level of vulnerability to potential systemic stress.
“Lebanon’s MPI score has been unchanged since October 2013, when Fitch upgraded Lebanon’s score to ‘1’ from a previous score of ‘2,’” the publication said. Apart from Lebanon, Angola, Bahrain, Cameroon, Cape Verde, Egypt, Israel, Kenya, Kuwait, Morocco, Namibia, Nigeria, Oman, Saudi Arabia, the Seychelles, South Africa, Tunisia, the UAE and Uganda maintained an MPI score of “1” in the Middle East and Africa region. Other countries in this category include Canada, Denmark, France, Germany, Japan and the United States.
“In parallel, the agency indicated that Lebanon’s banking sector was among 15 banking systems that have a Banking System Indicator of ‘b.’ The BSI is a measure of intrinsic banking system quality or strength, derived from Fitch’s Viability Ratings for banks. It deliberately excludes potential support from shareholders or governments since the objective is to highlight systemic weaknesses that might trigger the need for such support,” Byblos Bank said.
Fitch said Lebanon maintained an MPI score of 1
The bank said the BSI is an asset-weighted average of bank Viability Ratings for at least two-thirds of banks in any banking system, including systemically important unrated banks.
“Lebanon came in the ‘b’ category, along with Egypt and Nigeria in the Middle East and Africa region, as well as with Argentina, Armenia, Ecuador and Kazakhstan, among others, worldwide. Fitch said 60 percent of banking systems in developed countries have BSIs of ‘a’ and higher. It added that only three banking sectors in developed economies have a BSI of ‘aa’ and only one sector has a BSI of ‘ccc’ or lower,” the publication said. –