Financial institutions to find 2008 a difficult year - S&P
Mumbai (ANTARA News/Thomson Financial) - Standard & Poor's Ratings Services
said financial institutions will continue to be tested in coming months, maybe
in a "significant" way, depending on the length and depth of the economic
slowdown.
The rating agency said credit and liquidity problems have quickly developed as
significant factors affecting issuers and investors.
The speed at which they have become apparent and their severity have taken
market participants by surprise, S&P said in a report.
"Fortunately, many financial institutions entered this down cycle from a
position of strength. But as the dislocation becomes protracted, they're
clearly using that strength up," the ratings agency added.
Despite the fears of recession and deteriorating asset quality, lower earnings
won't necessarily translate into lower ratings, the report said.
S&P's credit analyst Victoria Wagner said the ratings agency has built a normal
cyclical decline into the ratings, as well as considerations of improved risk
management, and it will consider ratings changes in the context of the larger
economy, as well as in comparison to how institutions with similar profiles are
faring.
"For the most part, our rating actions and outlook changes have been related to
outliers with respect to risk management lapses and outsize concentrations of
risk," Wagner said. (*)
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