Le­banon bank vul­ner­a­bil­ity low: Fitch

Un­changed since 2013, MPI score puts bank­ing sec­tor with U.S., Saudi Ara­bia

The Daily Star (Lebanon) - - BUSINESS -

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. –

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