S&P: Euro crisis impact on Phl banks moderate

By Lawrence Agcaoili, The Philippine Star

Posted at May 05 2012 08:47 AM | Updated as of May 07 2012 12:59 AM

Manila, Philippines - New York-based Standard & Poor’s Ratings Services said banks operating in the Philippines are moderately exposed to the impact of the sovereign debt crisis in Europe.

S&P managing director and lead analytical manager Ritesh Maheshwari said in a press conference that the impact of the debt crisis in the euro zone area on the Philippine banking system would be moderate compared to other countries in the Asia Pacific Region.

“Philippine banks are moderately exposed this,” Maheshwari said.

In a report titled “Why Eurozone Risks Could Still Hit the Asia-Pacific Banking Sector in 2012,” Maheshwari warned that a further decline in exports and its negative impact on local economies would be the key risk factor for the Asia-Pacific banking industry.

He explained that the economy of the Asia-Pacific region is basically export-driven.

As a total of exports to the domestic economy as measured by the gross domestic product (GDP), data showed that Hong Kong had the highest with 176.21 percent followed by Singapore with 155.3 percent, Malaysia with 81.85 percent, Vietnam with 76.48 percent, Taiwan with 65.72 percent, Thailand with 65.44 percent, and Korea with 49.68 percent.

Other countries with domestic economies dependent on exports include China with 28.9 percent, Indonesia with 23.8 percent, Philippines with 22.4 percent, India with 16.2 percent, and Japan with 13.99 percent.

In terms of exports to Europe, China had the highest with 19.1 percent followed by India with 17.8 percent, Vietnam with 17.2 percent, Taiwan with 13.5 percent, Philippines with 12.8 percent, Japan with 11.7 percent, Malaysia with 10.7 percent, Korea with 10.2 percent as well as Indonesia and Hong Kong with 10.1 percent.

In terms of exports to the US, Vietnam had the highest with 17.9 percent followed by China with 16.9 percent, Philippines with 16.7 percent, Japan with 15.3 percent, Taiwan with 11.6 percent, India with 11.2 percent, and Korea with 10.2 percent.

“A strong dependency on exports leaves the Asia-Pacific region susceptible to any flare-up in the European debt crisis,” S&P said.

It warned that it would consider taking negative rating actions on the banking sectors of the affected Asia Pacific countries if the debt woes in Europe lead to a more severe global slowdown.

Maheshwari said Japanese banks have the largest among Asia Pacific banks to countries under pressure in bond markets including Greece, Italy, Ireland, Portugal, and Spain.