Moody's Concludes Rating Review of Four Belarus Banks

(Source: Info-Prod Research (Middle East))trackingMoody's Investors Service has downgraded thelong-term global local currency (GLC) deposit ratings of four Belarusbanks as follows: Belarusbank -- to B1 from Ba1; Belagroprombank -- to B1from Ba1; Belpromstroibank -- to B1 from Ba1; and Belinvestbank -- to B1from Ba2. The rating agency has affirmed all of the banks' other ratingsincluding their E+ bank financial strength ratings (BFSRs), but haslowered the Baseline Credit Assessment (BCA) of Belarusbank to B2 fromB1; the other banks' BCAs remain unchanged. The outlook on the fourfinancial institutions' long-term ratings is stable, in line with thestable outlook on Belarus's sovereign rating. These rating actions conclude Moody's review process, which was initiated on 26 May 2009 and was focused on Belarus's ability to provide support to its banking system, as outlined in the rating agency's Special Comment entitled "Financial Crisis More Closely Aligns Bank Credit Risk and Government Ratings in Non-Aaa Countries", published in May 2009. Moody's has refined its assessment of the ability of the Belarus state toprovide systemic support as the worsening of the local economy and theresulting reduced financial capacity and policy flexibility may adverselyaffect the Belarus government's ability to support the banking sector. Moody's previously used the local currency deposit ceiling (LCDC) as themain input for its assessment of the ability of the national governmentto support the banks. Although anchoring the probability of support atthe LCDC is appropriate in most circumstances -- regarding the provisionof liquidity to a selected number of institutions over a short period oftime -- this might overestimate the capacity, and even willingness, of acentral bank to support financial institutions in the event of a bankingcrisis becoming both truly systemic and protracted. Moody's therefore believes that the government's local currency debt rating (usually adjusted by no more than two notches of uplift due to the array of tools available to the central bank to support the banking system) should have a greater weight when considering the ability of thegovernment to provide systemic support. Moody's refined approach allows two notches of uplift from the government bond rating as the main input for its assessment of the ability of the national government to support the banks. However, given the weakening economic conditions in Belarus and significant involvement of the stateinto the banking sector and the real economy -- both dominated bystate-controlled entities -- Moody's views Belarus's government bondrating of B1 (stable outlook) as the most appropriate indicator of thegovernment's ability to provide systemic support to the local bankingsector. Amid the crisis, the Belarus government has been supportive by providingunsecured short-term liquidity to the system and some additional capitalto the four state-owned banks, as reflected by recent capital injectionof BYR3 trillion (US$1.4 billion) in December 2008. The alignment of thesystemic support input with the government bond rating also reflectsMoody's view of the state's willingness to support the banking system.



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