Bangkok--24 Aug--Moody's Investors Service
26 Financial Institution Government-Related Issuers Put on Review for Upgrade
Moody's Investors Service has released an update to its methodology for rating government related non-bank financial institutions as well as for rating government entities owned or sponsored by the government of Japan. In place of a government's bond rating, Moody's will now use the newly introduced Local Currency Deposit Ceiling as a measure of the ability of a national government to rescue government-owned financial institutions. The change in methodology may result in rating upgrades for 26 government related non-bank financial institutions.
The use of the Local Currency Deposit Ceiling as a proxy for a government's ability to support a troubled financial institution reflects the important role played by these institutions. According to Moody's Chief Credit Officer for Financial Institutions, David Fanger, "experience has shown that a government or monetary authority may extend support to government-owned (or chartered) financial institutions in order to prevent systemic disruptions. This can occur even after the government has defaulted on its own obligations." In particular, he notes, "governments are motivated to do this because a failure by a major government-owned (or chartered) financial institution could negatively affect investor confidence and spill over into the commercial banking system."
As part of the revised methodology, Moody's also announced that it will use Japan's Local Currency Deposit Ceiling (Aaa) in place of the Japan Government Bond rating (A2) as the rating of the support provider when assessing the credit risk of all Japanese government related entities.
Three non-financial entities sponsored by the Japanese government have been placed on review as a result of the revised methodology.
Below is a list, arranged by country, of those entities whose ratings are affected by the announced changes in methodology.
Banco Nacional de Desenvolvimento Economico e Social (Brazil)
Senior Unsecured (foreign currency) -- Ba1 (on review)
Croatian Bank for Reconstruction and Development (Croatia)
Issuer Rating (foreign currency) -- Baa1 (on review)
Czech Export Bank, a.s. (Czech Republic)
Issuer Rating -- A1 (on review)
Hong Kong Mortgage Corporation Ltd. (Hong Kong)
Issuer Rating (domestic currency) -- Aa3 (on review)
Hungarian Development Bank Ltd. (Hungary)
Senior Unsecured (domestic currency) -- A1 (on review)
FHB Mortgage Bank Co. Plc. (Hungary)
Bank Deposits -- A2 (on review)
Cassa Depositi e Prestiti S.p.A. (Italy)
Senior Unsecured (domestic currency) -- Aa2 (on review)
Sace S.p.A. (Italy)
Insurance Financial Strength (foreign currency) -- Aa2 (on review)
Development Bank of Japan (Japan)
Issuer Rating (domestic currency) -- A2 (on review)
Japan Bank for International Cooperation (Japan)
Issuer Rating (domestic currency) -- A2 (on review)
Japan Expressway Holding and Debt Repayment Agency (Japan)
Senior Secured (domestic currency) -- A2 (on review)
Japan Finance Corporation for Municipal Enterprises (Japan)
Backed Senior Unsecured (domestic currency) -- A2 (on review)
Japan Finance Corporation for Small and Medium Enterprise (Japan)
Issuer Rating (domestic currency) -- A2 (on review)
Nippon Telegraph and Telephone Corporation (Japan)
Senior Secured (domestic & foreign currency) -- Aa2 (on review)
Shoko Chukin Bank (Japan)
Senior Unsecured (domestic currency) -- A2 (on review)
Urban Renaissance Agency (Japan)
Senior Secured (domestic currency) A2 (on review)
Development Bank of Kazakhstan (Kazakhstan)
Senior Unsecured (foreign currency) -- Baa1 (on review)
Export-Import Bank of Korea (The) (Korea)
Senior Unsecured (domestic currency) -- A3 (on review)
Mortgage and Land Bank of Latvia (Latvia)
Bank Deposits -- A2 (on review)
Banco Nacional de Comercio Exterior, S.N.C. (Mexico)
Senior Unsecured (foreign currency) -- Baa1 (on review)
Banco Nacional de Obras y Servicios Publicos (Mexico)
Issuer Rating (domestic & foreign currency) -- Baa1 (on review)
Instituto para la Proteccion al Ahorro Bancario (Mexico)
Issuer Rating (domestic currency) -- Baa1 (on review)
Nacional Financiera, S.N.C. (Mexico)
Commercial Paper (foreign currency) -- P-2 (on review)
Sociedad Hipotecaria Federal, S.N.C. (Mexico)
Backed Senior Unsecured (domestic currency) -- Baa1 (on review)
Eximbanka SR (Slovakia)
Bank Deposits (foreign currency) -- A2 (on review)
Slovak Guarantee & Development Bank (Slovakia)
Bank Deposits (foreign currency) -- A2 (on review)
Development Bank of Southern Africa (South Africa)
Issuer Rating -- Baa1 (on review)
Industrial Development Corp. of South Africa (South Africa)
Issuer Rating (foreign currency) -- Baa1 (on review)
Export-Import Bank of Thailand (Thailand)
Issuer Rating - Baa1 (on review)
In addition, the ratings on the Export Credit Bank of Turkey, KECIC
(State Insurance Corporation for the Insurance of Export Credit & Investment of Kazakhstan), and Kazakhstan Mortgage Company JSC have been affirmed, as the substitution of the LCDC for the government bond rating for these issuers will not result in a rating change.
For more information, please see Moody's Special Comment "Revised Methodology for Government Related Non-Bank Financial Institutions,"August 2006.
New York
David Fanger
Chief Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Tokyo
Mutsuo Suzuki
Senior Vice President
Financial Institutions Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100