Korea’s commercial banks recently saw their credit ratings raised while many big foreign banks suffered downgrades by three global rating agencies.
According to the Korea Center for International Finance, six Korean banks recently enjoyed upgraded credit ratings or more positive outlooks from the rating firms.
In July, Standard & Poor’s raised its rating of Shinhan Bank and Hana Bank by one notch.
In November, Fitch Ratings revised its outlook on three state-run banks ― Industrial Bank of Korea, Export-Import Bank of Korea, and Korea Development Bank ― upward from “stable” to “positive.”
Fitch raised its outlook on Shinhan Bank from “negative” to “stable” last September.
As of November, Fitch graded 11 Korean banks as stable and S&P evaluated 11 out of 12 Korean banks as stable. Moody’s Investors Service regarded 12 out of 17 Korean banks as stable.
On the other hand, major global banks suffered a series of downgrades in the wake of the eurozone crisis.
In late November, S&P downgraded more than 30 investment banks in the United States, Europe and Japan.
They included Bank of America, Citigroup, JPMorgan Chase, Morgan Stanley, HSBC, UBS, Mizuho, and Sumitomo Mitsui Banking Corp.
Moody’s downgraded three major French banks ― BNP Paribas, Credit Agricole and Societe Generale.
But experts warn against excessive optimism despite the rating agencies’ positive assessment of Korean banks.
“While Korean banks recently posted high earnings, their financial position could be weaker if they face foreign currency liquidity problems,” a senior research of the KCIF said.
The nation’s chief financial regulator has named stabilization of the foreign exchange market as the most urgent task in the financial market.
Financial Services Commission Chairman Kim Seok-dong pledged to put priority on securing liquidity in banks’ foreign currency trading, saying that the issue was “the No. 1 regulatory target for this year.”
His remarks come amid growing anxiety over the possibility of massive outflow of foreign capital in Korea, as experts point to the risk of a financial crisis due to fiscal difficulties in several European countries.
Many officials at the FSC and the Financial Supervisory Service seemingly view the recent woes in Greece as serious.
The FSS recently formed a task force with local banks to intensify their monitoring of foreign capital liquidity.
The task force, which consists of several inspectors of the FSC and FSS as well as executives from 12 local banks, has held several meetings.
During the meetings, the task force called in bank executives in charge of finance and asked them to review their overall foreign capital liquidity more closely and better prepare for any future turbulence.
