Moody's reviews ratings of four Malaysian banks

Moody's reviews ratings of four Malaysian banks

KUALA LUMPUR (AFP): Moody's Investors Service yesterday placed
four leading Malaysian banks under review for possible downgrades
of their credit ratings, citing mounting pressure on the
financial system.

The four were the country's top three banks -- Malayan Banking
Bhd., Bank Bumiputra Malaysia Bhd. and Public Bank Bhd. -- and
Sime Bank Bhd., the fifth largest.

The move was "a result of the increasing pressures on the
major financial institutions in Malaysia, which are undermining
asset quality and liquidity in the system," Moody's said in the
statement.

The New York-based credit assessor said "the Malaysian economy
continues to suffer from both intrinsic weaknesses and the effect
of financial crises in other Asian countries, which is eroding
confidence."

It noted that interest rates remained high while the local
currency, property values and share prices continued to fall.

"Asset quality and funding problems have already severely hit
local investment banks and stockbrokers, as well as finance
companies. Many of these entities have links with local banks,"
it said.

Given the government's recent intention to consolidate the
financial system, Moody's warned that it "could lead to a
dilution of the financial strength of healthier institutions."

The agency also noted "the extent of the Malaysian
government's pervasive influence on the direction of Malaysia's
economic development and on its business structures, and the lack
of transparency with which it has pursued its objectives."

"These factors heighten the risk that mergers would be forced
on some institutions on unfavorable terms, which could lead to
longer term risks in the financial system," it said.

Under review are the Baa-1 long-term ratings and prime-2 short
term ratings for Malayan Banking, Bank Bumiputra and Public Bank
along with the Baa-2 and prime-3 ratings for Sime Bank.

Malayan Banking's A-3 rating for subordinated debt is also
being reviewed along with the financial strength ratings of D for
Bank Bumiputra and Sime Bank. The financial strength ratings of
C-plus for Malayan Banking and C for Public Bank were already
under review for possible downgrades.