Moody's ratings of state banks seen as unfair: BRI

Moody's ratings of state banks seen as unfair: BRI

JAKARTA (JP): The poor ratings given by Moody's Investor Service of the United States to Indonesia's seven state-owned banks are unfair, said a senior banker here yesterday.

A senior executive of the state-owned Bank Rakyat Indonesia (BRI) said that Moody's failed to include the role of the government in its assessment.

"It is unfair to give them a low rating given the government's strong commitment to support their operations," said the senior BRI executive, who asked not to be identified.

He added that the government's support of state-owned banks, especially in developing countries like Indonesia, is critical to the banks' financial strength.

In its Bank Financial Strength Rating (BFSR) issued recently, Moody's assigned a "D plus" grade to Bank Negara Indonesia, the largest of the seven state-owned banks. Bank Tabungan Negara and Bank Ekpor Impor Indonesia also received "D plus" ratings, while Bank Rakyat Indonesia and Bank Dagang Negara have been listed as "E plus". Bank Bumi Daya and Bank Pembangunan Indonesia (Bapindo) each received "E" ratings.

The BFSR was only introduced by Moody's late last year to assess the actual or intrinsic strength of a financial institution.

Moody's bank financial strength ratings, a supplement to its credit risk ratings, also received negative responses in China, Hong Kong, Japan and the United States, said the senior BRI executive.

Many Asian bankers claim that Moody's ratings ignore important aspects as the environment, legal factors and the status of the financial institutions.

"For many people, state banks, which are 100 percent owned by the government, are safer than private banks," he said. "The people's confidence should not, therefore, be separated from the bank's activities."

However, BNI's acting president Willy Sambalao said earlier that he was not surprised with the low grades assigned to BNI and other state-owned banks, given the strict criteria imposed by Moody's.

Indonesian banks were not the only ones to receive the "E" grade. "Tokai Bank of Japan also got the same rating," he reported.

In terms of credit risk, Moody's, like its rival Standard & Poors, gave more favorable ratings to the state-owned banks despite their mounting bad debts.

For example, Moody's assigned a Baa3 rating for Bapindo's bonds and Ba1 for its long-term deposit obligations. The other six state-owned banks also received the same rating for both their bonds and long-term deposits. Moody's said that the banks' debt and deposit ratings were based mainly on the strong support given to the banks by the Ministry of Finance, which is the sole shareholder. Ba1 and Baa3 ratings mean that those banks have the capacity to meet deposit and other financial obligation.(hen)