Cambodia's systemic support rating drops, but ACLEDA - the only rated Cambodian bank - gets Ba1 ‘stable outlook' rating
US-based ratings agency Moody's has revised its systemic support rating for Cambodia downwards from Ba1 to B1, it said Friday, following a review of the rating in relation to ACLEDA bank.
In a statement following the conclusion of the ratings review, Moody's set ACLEDA'S local currency deposit and issuer rating at Ba1 "with a stable outlook".
The ratings agency said last month it was evaluating ACLEDA's rating based on its exposure to the Cambodian banking system - Moody's has reconsidered its ratings criteria in the wake of the global financial crisis for non-Aaa countries, it said. ACLEDA is the only Cambodian bank to have an international rating.
"In light of Cambodia's current situation and prospects, Moody's has concluded that the systemic support input for Cambodian bank ratings should be changed from Ba1 to B1," said Christine Kuo, a Moody's vice president and senior analyst in the statement.
The Kingdom's rating - based on its ability to support local banks - has therefore been changed from "questionable credit quality" to "a generally poor credit quality".
Tal Nay Im, director general of the National Bank of Cambodia, declined to comment on Sunday.
Moody's said that the credit risk in the Cambodian banking system was moderate, "but it could increase if the economy falls into recession for a protracted period".
It added that high dollarisation limited the central bank's ability as lender of last resort.
The ratings agency noted, however, that the National Bank of Cambodia had set up an emergency credit line of US$100 million since the onset of the liquidity crunch that began to hit the domestic banking system at the end of last year.
Despite the adjustment of the Cambodia rating, ACLEDA bank was given a long-term currency deposit and issuer rating of Ba1, Moody's said, due to "the potential shareholder support [which] is sufficient to lift the bank's long-term local currency deposit and issuer ratings by one notch to Ba1 from its baseline credit assessment of Ba2". Shareholders had demonstrated long-term support for ACLEDA, the statement added, through equity and debt-financing.
"Normally they [Moody's] rate a bank no higher than the country rating," ACLEDA President and CEO In Channy said Sunday. "But ACLEDA is a special case," he added, referring to the bank's strong internal credit support structure.