Moody reassesses govt’s capacity to provide support

KUALA LUMPUR: Moody’s Investors Service is in the midst to reassess the support assumptions to reflect its assessment of a government’s capacity to provide support, represented by its sovereign ratings and the probability of it commi ing public funds to support particular financial institutions.

In a statement yesterday, it said bank failures have happened in all the markets they cover in Asia-Pacific countries ( APAC), except in Singapore.

“As a result, we do not assume that all distressed banks would automatically receive timely support from their governments to avoid default or closure,” Moody’s said.

Moreover, it said its assessment also incorporates the potential evolution in government support as regulators gain more power or tools to deal with ailing financial institutions, or as political environments change to make the failure of the financial institution and senior credit losses more acceptable.

“This raises the possibility that APAC authorities will resolve financial institutions in ways different from previous crises, justifying our reassessment of our government support assumptions,” it explained.

Troubled banks, for example, Sime Bank and Bank Bumiputra and finance companies in Malaysia were merged into other banking groups in the years a er the Asian financial crisis. Moody said APAC authorities have moved slowly on reforming their resolution regimes for financial institutions.

These reforms are not limited to banks but are mostly bank focused. — Bernama