Dow Jones Newswires
NEW YORK -- Moody's Investors Service Inc. placed the ratings of 10 Taiwanese banks under review for possible downgrade.
The review reflects Moody's concerns about the emerging trends and the underlying structural weaknesses in the Taiwanese banking sector. These weaknesses include slowing credit demand, intensifying competition, rising corporate leverage in an overbanked financial system, and disintermediation -- or the movement of funds from low-yielding accounts at traditional banking institutions to higher-yielding investments in the general market.
The rating agency also said that the widening global economic crisis is impacting the Taiwanese economy, which may, in turn, aggravate the weaknesses in the banking system.
The banks that Moody's cited are Bank of Taiwan, Bank SinoPac, Chang Hwa Commercial Bank Ltd., Chiao Tung Bank Co., Chinatrust Commercial Bank, E. Sun Bank, First Commercial Bank, Hua Nan Commercial Bank Ltd., International Commercial Bank of China and United World Chinese Commercial Bank.
Although Moody's said it recognizes the ample resources that Taiwan possesses to mitigate the impact of the crisis, the ratings agency added that it believes the country is becoming increasingly vulnerable, and the overall risk level to the banking sector has been elevated.
The Taiwanese economy already has experienced a sharp deterioration in its trade performance and projects a significant reduction in economic growth this year. Further pressure on the New Taiwan dollar
may tax the resources of the central bank and place increasing strain on the already highly leveraged industrial sector, Moody's said.
Likewise, the banking sector has experienced rising nonperforming assets amid deteriorating operating margins. Moody's said its review will assess the ability of the banking sector to withstand this
deteriorating and uncertain environment. |
