Mumbai: India is among the nine of 20 of the world’s largest economies and banking sectors that Standard and Poor’s has identified as showing a negative trend for economic risk.
It said that risks to the global banking sector credit quality leading into 2016 remain numerous.
In a report titled “The 2016 Global Credit Outlook for Banks: Challenges Still Numerous Leading Into The Chinese Year Of The Monkey,” it identifies four key risks and two emerging risks that it believes could be most likely to influence bank ratings in 2016.
Among the nine, besides India, are China and Japan (being the world’s second- and third-largest economies), the four “BRIC” countries (Brazil, Russia, and India, in addition to China), Germany, Canada, Sweden, and Hong Kong.
The key risk factors that the rating agency identified are China, higher US interest rates and potentially volatile currencies and market prices including oil, other commodities, and property; regulatory developments and geopolitical risks. The credit quality of banks can be influenced by lower liquidity and cyber-security, said S&P adding that the relative importance of these key and emerging risks tends to vary by region.
The report, however, says that banks today are in much better shape to contend with challenges ahead than in 2007 when the banks took a major hit during the global crisis.
Across six major regions globally, issuers on negative outlook or CreditWatch with negative implications still outnumber positive ones, resulting in a net negative bias of about 30 per cent of banking group issuers (as on December 4, 2015).
The report says while there are variations between regions, “our outlook overall is that ratings momentum in 2016 is more likely to be negative.”
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