No rating actions directly related to stress in the United States regional banking sector or from Europe after the recent takeover of Credit Suisse are expected.
Gunning in a recent report said that of the about 380 banks and non-bank financial institutions that the rating agency rated in Asia-Pacific, it anticipates no rating actions directly related to stress in the United States regional banking sector, or from Europe after the recent takeover of Credit Suisse.
“We remain cautious, nonetheless, as previous banking crises indicate that banking sector contagion effects can take some time to fully play out,” Gunning said in the report titled “Asia-Pacific Financial Institutions Monitor 2Q 2023: Bank Contagion Risk Is Settling”. Though not its base case, the rating agency said a significant erosion of confidence beyond US regional banks or after the Credit Suisse takeover could lead to negative rating actions in the Asia-Pacific region.“In the takeover deal of Credit Suisse, the bank’s additional tier-1 instruments were written down to zero.
“We believe that AT1 capital instruments issued by banks are likely to become more costly in the coming months, and for some banks issuance may be outright difficult. “We expect this even though, in our view, the Credit Suisse outcome for AT1 instruments is not an automatic template for Asia-Pacific banks,” Gunning said.
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