National credit rating is the key factor affecting the Moody’s Vietnamese banks ranking.
Credit rating agency Moody’s has announced that it would consider lowering the ratings of 17 Vietnamese banks. The announcement came just a day after the company said it considered lowering Vietnam's credit rating, which is currently at Ba3.
However, Moody’s emphasized that this doesn’t reflect that the financial health of these banks was being lowered. It is completely influenced by Moody’s decision regarding Vietnam's national credibility.
The 17 banks affected are An Binh Bank (ABB), Asia Bank (ACB), Ho Chi Minh City Development Bank (HDBank), Bank for Foreign Trade of Vietnam (Vietcombank), Bank for Investment and Development of Vietnam, Lien Viet Post Bank, Military Bank (MB), South Asia Bank, Orient Commercial Bank (OCB), Saigon - Hanoi Bank (SHB), Tien Phong Bank (TPBank), Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam International Bank (VIB), Vietnam Bank for Industry and Trade (VietinBank), Vietnam Maritime Bank (MSB), Vietnam Prosperity Bank (VP Bank), and Vietnam Technological and Commercial Bank (Techcombank).
In particular, 4 banks were also considered to lower the baseline credit assessment (BCA) and the adjusted BCA. 9 banks were considered to lower the long-term Counterparty Risk Assessments (CR Assessments).
National credit is the main factor affecting Moody's ratings with Vietnamese banks. Because it will determine Moody’s assessment of the ability of the government to support banks in difficult times. If national credit is lowered, it will be difficult for the government to support banks, thereby reducing the credit of some banks.
In addition, in the case of the BCA or the long-term credits of banks which are equal to the national credit or have reached their peaks, Moody’s will also lower these ratings to maintain equivalency.
Thus, the impact of national credit on banks will be varied. State-owned banks, including Vietcombank, VietinBank, Agribank, and BIDV, will be re-rated in terms of long-term local currency deposits and issuers of foreign and domestic currency debt. This is because these banks are having the same level of credit as the country.
For private banks such as ACB, MB and Techcombank, the factors being reviewed are BCA, long-term local currency deposit credit and domestic/foreign currency debt issuer, as they are now having the same level of credit with the country. Meanwhile, assessments with ABB, OCB, TPBank, VIB and VP Bank are limited to foreign currency deposit ratings only.
Moody’s said it could keep the ratings of the above 17 banks with a stable outlook if Vietnam's credit is also kept in Ba3 with the same outlook. In contrast, Moody’s will lower the rankings and ratings of these banks if Vietnam's creditworthiness goes down.
Author: Hà Thu