Lebanon Businessnews News
 

S&P keeps banking sector in high-risk zone
Political risk, sovereign exposure are main threats
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Standard & Poor’s (S&P) latest Banking Industry Country Risk Assessment (BICRA) placed the country in the 'high-risk' group, with others such as Egypt, Nigeria, and Tunisia. The assessment was attributed to the slowing economic growth affected by the regional situation: “The civil war in Syria is weighing negatively on investments and the main confidence-sensitive business sectors, such as tourism and financial services.”

S&P maintained the banking sector’s rating at BB negative. It cited the large and resilient deposit base, adequate regulation and supervision, and stable competitive landscape as the major strengths of the sector. It also mentioned the private sector’s ability to navigate through crises as another positive factor contributing to this resilience.

High vulnerability to internal and external political risk, sovereign exposure, and the high dollarization of the economy were cited as the main threats to the sector.

The agency said there were strong concerns over local banks’ high foreign currency lending, which reached 74 percent of total lending at end-October 2012. It also expected a further decline in loan quality in the coming quarters, but noted that banks would be able to absorb such a deterioration.

S&P said the current account deficit is also a significant factor affecting the banking industry, which absorbs most of the government's debt. The average current account deficit for the 2008-2011 period made up 16.6 percent of GDP.
Reported by Hanadi Chami
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Date Posted: 7/1/2013