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ARCHIVE | Sector And Industry Variables | Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Update: March 2023
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ARCHIVE | Sector And Industry Variables | Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Update: March 2023

This article is no longer active. Please see "Banking Industry Country Risk Assessment Update: April 2023," published April 28, 2023.

Overview And Scope

Here S&P Global Ratings provides additional information on the variables derived from the application of the criteria “Banking Industry Country Risk Assessment Methodology And Assumptions," Dec. 9, 2021, that it uses primarily when applying its methodologies to develop the stand-alone credit profile and issuer credit rating on a financial institution (“Financial Institutions Rating Methodology,” Dec. 9, 2021). This report is intended to be read in conjunction with those criteria. For a further explanation of sector and industry variables reports, please see the description at the end of this article.

We typically update this publication every month to summarize our latest BICRA assessments, economic and industry risk scores--summarized in chart 1--and components, and related assessments (government support assessments and BICRA scores for estimates and regional averages). The variables are current as of time of publication of this article, but some may be amended before the publication of our next update. Such amendments would be communicated through our normal surveillance publications, for instance through a media release or bulletin, and would be summarized in the following monthly update of this publication.

The variables include our BICRAs by group and country (table 1), our BICRA economic risk and industry risk scores and components (table 2), and our BICRA scores for estimates and regional averages (table 4). The variables also include our government support assessment by region (table 3), which is derived from the application of our criteria (“Financial Institutions Rating Methodology”). All these variables were last published in “Sector And Industry Variables | Banking Industry Country Risk Assessment Update: February 2023,” Feb. 23, 2023.

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Key Publication Information

This article is primarily related to “Banking Industry Country Risk Assessment Methodology And Assumptions,” published on Dec. 9, 2021.

In addition, the variables covered in this article include our government support assessment (see table 3), which is derived from the application of “Financial Institutions Rating Methodology,” published on Dec. 9, 2021. Moreover, our BICRA estimates and regional averages (see table 4) are derived from "Risk-Adjusted Capital Framework Methodology," July 20, 2017.

We will typically update this publication every month to summarize our latest BICRA assessments, economic and industry risk scores and components, and related assessments.

Latest BICRA Actions And Reports

Since we last published the BICRA update on Feb. 23, 2023, we have revised:

  • Austria: Our industry risk trend to stable from negative; and
  • Kazakhstan: Our BICRA to Group ‘8’ from Group ‘9’, and our industry risk score to ‘8’ from ‘9’. We also revised some scores on related factors.

Since we last published this report on Feb. 23, 2023, we have published comprehensive BICRA reports on: Belarus and Iceland.

Austria 

We have revised our industry risk trend for Austria to stable from negative. This reflects our view that pressures on Austrian banks' profitability have moderated. Cost optimization measures and improving revenue have contributed to the development, which we foresee will be sustainable. However, we expect only a marginal further profitability improvement in the medium term, reflecting a weakening economy, high inflationary pressure on operational costs, and increased risk costs. In our view, the sector's return on assets should remain about 0.5% in the medium term. Our base-case scenario does not take into account the tail risks from the secondary effects of the Russia-Ukraine war on Austria's and Europe's economies.

Kazakhstan 

We have revised our BICRA for Kazakhstan to Group ‘8’ from Group ‘9’, and our industry risk score to ‘8’ from ‘9’. We believe that Kazakhstan's banking industry is demonstrating signs of recovery from a protracted correction following mounted credit losses. This recovery is being supported by favorable commodity prices stimulating credit demand, alongside material improvements in asset quality. Kazakhstani banks benefit from solid margins and have demonstrated capacity to generate earnings to buffer against risks even as the external operating environment has remained uncertain and volatile.

Sector And Industry Variables

S&P Global Ratings uses its BICRA economic risk and industry risk scores to determine the anchor for a financial institution, which is the starting point of a rating (see paragraph 7 in the financial institutions criteria).

Our BICRA criteria evaluate and compare the relative strength of global banking systems. BICRA scores are on a scale from 1 to 10 (see table 1), with group 1 representing the lowest-risk banking systems and group 10 the highest-risk ones (see paragraph 4 in the BICRA criteria).

Table 1 - BICRAs By Group And Country
(Group '1' to '10', from lowest to highest risk)
Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 Group 7 Group 8 Group 9 Group 10
Austria Australia Ireland Bermuda Brazil Bahrain Armenia Argentina Belarus
Belgium Chile Kuwait Hungary Brunei Georgia Costa Rica Azerbaijan Nigeria
Canada Czech Republic Malaysia Iceland China Guatemala Cyprus Bangladesh Tunisia
Finland Denmark New Zealand Italy Colombia Morocco Greece Bolivia Ukraine
Hong Kong France Poland Malta India Oman Honduras Cambodia
Liechtenstein Germany Saudi Arabia Mexico Indonesia Thailand Jamaica Egypt
Luxembourg Israel Slovenia Panama South Africa Jordan El Salvador
Norway Japan Spain Peru Trinidad and Tobago Kazakhstan Mongolia
Singapore Korea Taiwan Philippines Paraguay Turkiye
Sweden Netherlands Portugal Uzbekistan Vietnam
Switzerland U.K. Qatar
U.S. United Arab Emirates
Uruguay
Changes to this table since our previous monthly article published Feb. 23, 2023: Kazakhstan. Data as of March 30, 2023.BICRAs -- Banking Industry Country Risk Assessments. Source: S&P Global Ratings.

Table 2 - BICRA Economic Risk And Industry Risk Scores And Components
(Group '1' to '10', from lowest to highest risk)
Economic risk factors and descriptors Industry risk factors and descriptors
Country BICRA Group Economic Resilience Economic Imbalances Credit risk in the economy Economic risk/Trend Institutional framework Competitive dynamics Systemwide funding Industry risk/Trend
Switzerland 2 Very Low Low Low 2/Stable Low Low Low 2/Stable
Finland 2 Very Low Low Low 2/Stable Intermediate Low Intermediate 3/Stable
Austria 2 Very Low Low Intermediate 2/Stable Intermediate Intermediate Low 3/Stable
Norway 2 Very Low Intermediate Low 2/Stable Low Low Intermediate 3/Stable
Sweden 2 Very Low Intermediate Low 2/Stable Intermediate Low Intermediate 3/Stable
Luxembourg 2 Very Low Intermediate Low 2/Stable Intermediate Intermediate Very Low 3/Stable
Belgium 2 Low Low Low 2/Stable Intermediate Intermediate Very Low 3/Stable
Liechtenstein 2 Low Low Low 2/Stable Intermediate Intermediate Low 3/Stable
Hong Kong 2 Low Intermediate Intermediate 3/Stable Very Low Low Very Low 1/Stable
Canada 2 Very Low Intermediate Intermediate 3/Stable Very Low Low Low 2/Stable
Singapore 2 Very Low Intermediate Intermediate 3/Stable Very Low Low Low 2/Stable
Germany 3 Very Low Low Low 2/Stable Intermediate High Very Low 4/Stable
Denmark 3 Very Low Low Intermediate 2/Stable Intermediate Intermediate Intermediate 4/Stable
Japan 3 Low Very Low Low 2/Stable Intermediate High Very Low 4/Stable
Australia 3 Very Low High Low 3/Stable Low Low Intermediate 3/Positive
Netherlands 3 Very Low Intermediate Intermediate 3/Stable Intermediate Intermediate Low 3/Stable
U.S. 3 Low Low Intermediate 3/Stable Intermediate Intermediate Very Low 3/Positive
Korea 3 Low Low Intermediate 3/Stable Intermediate Intermediate Low 3/Stable
France 3 Low Intermediate Low 3/Stable Intermediate High Low 4/Stable
Czech Republic 3 Intermediate Low Intermediate 3/Negative Intermediate Intermediate Intermediate 4/Stable
Israel 3 Intermediate Intermediate Low 3/Stable Intermediate High Low 4/Stable
U.K. 3 Low Intermediate High 4/Stable Low Intermediate Low 3/Stable
Chile 3 High Low Intermediate 4/Negative Intermediate Low Low 3/Stable
Taiwan 4 Low Low Intermediate 3/Stable Intermediate Very High Very Low 5/Stable
New Zealand 4 Very Low High Intermediate 4/Negative Intermediate Low High 4/Stable
Ireland 4 Low High Intermediate 4/Stable Intermediate High Low 4/Stable
Slovenia 4 Intermediate Intermediate Intermediate 4/Stable Intermediate Intermediate Intermediate 4/Stable
Spain 4 Intermediate Intermediate Intermediate 4/Stable Intermediate High Low 4/Stable
Poland 4 High Low Intermediate 4/Stable Intermediate Very High Low 5/Negative
Saudi Arabia 4 High Intermediate Intermediate 5/Stable Intermediate Intermediate Low 3/Stable
Malaysia 4 High Low High 5/Stable Intermediate High Low 4/Stable
Kuwait 4 High Intermediate Intermediate 5/Stable High Intermediate Low 4/Stable
Malta 5 Intermediate Low High 4/Negative Very High Intermediate Intermediate 6/Stable
Panama 5 Intermediate High Intermediate 5/Negative Intermediate Low Very High 5/Stable
Iceland 5 Intermediate High Intermediate 5/Stable Intermediate Intermediate High 5/Stable
Hungary 5 Intermediate High Intermediate 5/Negative Intermediate High Intermediate 5/Stable
Qatar 5 Low High High 5/Stable Intermediate Intermediate Very High 6/Stable
Uruguay 5 High Low High 5/Stable High High Intermediate 6/Stable
United Arab Emirates 5 Low High Very High 6/Stable Intermediate High Intermediate 5/Stable
Italy 5 Intermediate High High 6/Stable Intermediate High Intermediate 5/Stable
Portugal 5 Intermediate High High 6/Stable Intermediate High Intermediate 5/Stable
Bermuda 5 Intermediate Very High Intermediate 6/Stable Intermediate Low Intermediate 3/Stable
Peru 5 High Very Low Very High 6/Negative Low Intermediate Intermediate 3/Stable
Mexico 5 Very High Intermediate Intermediate 6/Stable Intermediate Intermediate Low 3/Stable
Philippines 5 Very High Low High 6/Stable High Intermediate Intermediate 5/Stable
Brunei 6 Intermediate Low High 4/Stable Extremely High Intermediate Low 7/Stable
Indonesia 6 High Low Very High 6/Stable High High Intermediate 6/Stable
China 6 Intermediate High Very High 7/Stable High High Very Low 5/Stable
India 6 High Intermediate Very High 7/Stable High High Low 5/Stable
Colombia 6 High High High 7/Stable High Intermediate Intermediate 5/Stable
Brazil 6 Very High Intermediate High 7/Stable Intermediate High Intermediate 5/Stable
Trinidad and Tobago 6 Very High Intermediate Very High 7/Stable High High Low 5/Stable
South Africa 6 Very High Intermediate High 7/Stable Intermediate Intermediate High 5/Stable
Bahrain 7 High High Very High 7/Stable Intermediate High High 6/Stable
Thailand 7 High High Very High 7/Stable Very High High Low 6/Stable
Morocco 7 Very High Intermediate Very High 7/Stable Intermediate High High 6/Stable
Oman 7 Very High High High 7/Stable Intermediate High High 6/Stable
Georgia 7 High High Very High 7/Stable Intermediate High Very High 7/Stable
Guatemala 7 Extremely High Intermediate Very High 8/Stable High Intermediate Intermediate 5/Stable
Cyprus 8 Intermediate High Very High 7/Stable High Very High Very High 8/Stable
Greece 8 High High Very High 7/Stable High Very High Very High 8/Positive
Costa Rica 8 High High Very High 7/Stable High Extremely High High 8/Stable
Uzbekistan 8 Very High Intermediate Very High 7/Stable Extremely High High Very High 9/Stable
Honduras 8 Very High Intermediate Extremely High 8/Stable Very High Intermediate High 7/Stable
Jordan 8 Extremely High Intermediate Very High 8/Stable High High High 7/Stable
Kazakhstan 8 High High Extremely High 8/Stable Extremely High High High 8/Stable
Armenia 8 Very High Intermediate Extremely High 8/Stable Very High High Very High 8/Stable
Paraguay 8 Very High Intermediate Extremely High 8/Stable Very High Very High High 8/Stable
Jamaica 8 Extremely High Intermediate Very High 8/Stable High Very High Very High 8/Stable
Bangladesh 9 Very High Low Extremely High 8/Stable Extremely High Extremely High Intermediate 9/Stable
Azerbaijan 9 Very High High Very High 8/Stable Extremely High High Very High 9/Stable
Bolivia 9 Very High High Extremely High 9/Stable Very High Very High High 8/Stable
Vietnam 9 Very High High Extremely High 9/Stable Extremely High Very High Intermediate 8/Stable
El Salvador 9 Extremely High Intermediate Extremely High 9/Negative High Intermediate Extremely High 8/Negative
Egypt 9 Extremely High High Very High 9/Stable Extremely High High High 8/Stable
Mongolia 9 Very High High Extremely High 9/Stable Extremely High High Very High 9/Stable
Cambodia 9 Very High High Extremely High 9/Stable Extremely High High Very High 9/Stable
Turkiye 9 Very High Very High Very High 9/Negative Very High Very High Very High 9/Negative
Argentina 9 Extremely High High Extremely High 10/Stable High High Very High 7/Negative
Belarus 10 Extremely High High Very High 9/Negative Extremely High Very High Extremely High 10/Stable
Ukraine 10 Extremely High Extremely High Extremely High 10/Stable Very High Very High Very High 9/Stable
Nigeria 10 Extremely High High Extremely High 10/Stable Extremely High High Very High 9/Stable
Tunisia 10 Extremely High High Extremely High 10/Stable Extremely High High Very High 9/Negative
Changes to this table since our previous monthly article published on Feb. 23, 2023: 1) Industry risk trend for Austria, 2) BICRA, Industry risk score for Kazakhstan.Data as of March 30, 2023. BICRA -- Banking Industry Country Risk Assessment. Comprehensive BICRA reports published since we last published this report: Belarus, Iceland.Source: S&P Global Ratings.

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We assess the capacity and willingness of sovereigns (see table 3) to support failing banks (or nonbank financial institutions where applicable) during a crisis based on their systemic importance, classifying sovereigns into three groups: highly supportive, supportive, and uncertain (see paragraph 225 in the “Financial Institutions Rating Methodology").

Table 3 - Government Support Assessment By Region
Asia-Pacific CEEMEA Latin America and Caribbean North America Western Europe
Country Government support assessment Country Government support assessment Country Government support assessment Country Government support assessment Country Government support assessment
Australia Highly supportive Kuwait Highly supportive Bolivia Supportive Bermuda Supportive Austria Uncertain
Brunei Highly supportive Qatar Highly supportive Brazil Supportive Canada Supportive Belgium Uncertain
China Highly supportive Saudi Arabia Highly supportive Chile Supportive United States of America Uncertain Cyprus Uncertain
India Highly supportive United Arab Emirates Highly supportive Colombia Supportive Denmark Uncertain
Indonesia Highly supportive Israel Supportive Guatemala Supportive Finland Uncertain
Japan Highly supportive Kazakhstan Supportive Mexico Supportive France Uncertain
Korea Highly supportive Morocco Supportive Peru Supportive Germany Uncertain
Malaysia Highly supportive Uzbekistan Supportive Trinidad and Tobago Supportive Greece Uncertain
Philippines Highly supportive Armenia Uncertain Uruguay Supportive Iceland Uncertain
Singapore Highly supportive Azerbaijan Uncertain Argentina Uncertain Ireland Uncertain
Taiwan Highly supportive Bahrain Uncertain Costa Rica Uncertain Italy Uncertain
Thailand Highly supportive Belarus Uncertain El Salvador Uncertain Liechtenstein Uncertain
Vietnam Highly supportive Czech Republic Uncertain Honduras Uncertain Luxembourg Uncertain
Hong Kong Supportive Egypt Uncertain Jamaica Uncertain Malta Uncertain
Bangladesh Uncertain Georgia Uncertain Panama Uncertain Netherlands Uncertain
Cambodia Uncertain Hungary Uncertain Paraguay Uncertain Norway Uncertain
Mongolia Uncertain Jordan Uncertain Portugal Uncertain
New Zealand Uncertain Nigeria Uncertain Spain Uncertain
Oman Uncertain Sweden Uncertain
Poland Uncertain Switzerland Uncertain
Slovenia Uncertain U.K. Uncertain
South Africa Uncertain
Tunisia Uncertain
Turkiye Uncertain
Ukraine Uncertain
There have been no changes to this table since our previous monthly article published on Feb. 23, 2023.CEEMEA -- Central and Eastern Europe, the Middle East, and Africa. Note: Data as of March 30, 2023. Source: S&P Global Ratings.

Countries for which we do not perform BICRAs are assigned estimates or proxies (depending on the magnitude of rated entities' aggregate exposure to issuers in these jurisdictions) for the purpose of computing risk-adjusted capital ratios. These estimates are made using a simplified BICRA analysis for jurisdictions that rated banks have significant aggregate exposure to--typically of US$5 billion or more (across all the entities we rate). We may also perform a BICRA estimate if rated banks' aggregate exposure is not significant, but we consider it appropriate to assign an estimate. Our BICRA proxies are usually calculated for jurisdictions for which global exposure is not very significant (i.e., typically below US$5 billion). The proxies are based on our foreign currency sovereign rating on the country for which we estimate the BICRA and economic and industry risk scores (see paragraph 12 in the “Risk-Adjusted Capital Framework Methodology,” July 20, 2017). The BICRAs, economic risk scores, equity market groups (see paragraph 125), and long-term foreign currency sovereign credit ratings that we assign to groups of countries and to regions represent the GDP-weighted average of BICRAs, economic risk scores, equity market groups, and long-term foreign currency sovereign credit ratings on the countries in these groups and regions (see paragraph 151 in “Risk-Adjusted Capital Framework Methodology”).

Table 4 - BICRA Scores for Estimates and Regional Averages
BICRA Estimates BICRA Regional Averages
BICRA Group Economic Risk BICRA Group Economic Risk
Andorra 7 6 Africa 9 9
Bahamas 7 7 Asia Pacific 5 6
Bosnia and Herzegovina 9 9 Central America and the Caribbean 8 8
Bulgaria 7 7 Europe, the Middle East and Africa 5 5
Croatia 7 7 Europe 4 4
Estonia 4 4 European Union 4 3
Latvia 5 4 Gulf Cooperation Council 5 5
Lithuania 5 5 Latin America 6 7
Romania 7 7 North America 3 3
Serbia 7 7 World 4 5
Slovakia 5 6
Data as of March 30, 2023. There have been no changes to this table since our previous monthly article published on Feb. 23, 2023.For the purposes of calculating the scores in the table, the North America region includes only Canada and the U.S.

Related Criteria

Related Research

This is a sector and industry variables report. A sector and industry variables report is a publicly available criteria-related publication that describes sector, industry, asset class, or regional variables that we expect to periodically update mainly to reflect our views on changing macroeconomic and market conditions. Sector and industry variables reports are not criteria because they do not establish a methodological framework for determining credit ratings.

Analytical Contact:Alfredo E Calvo, Mexico City 52-55-5081-4436;
alfredo.calvo@spglobal.com
Emmanuel F Volland, Paris 33-14-420-6696;
emmanuel.volland@spglobal.com
Devi Aurora, New York 1-212-438-3055;
devi.aurora@spglobal.com
Elena Iparraguirre, Madrid 34-91-389-6963;
elena.iparraguirre@spglobal.com
Sharad Jain, Melbourne 61-3-9631-2077;
sharad.jain@spglobal.com
Harm Semder, Frankfurt 49-693-399-9158;
harm.semder@spglobal.com
Michael L Forbes, Toronto 1-416-507-2525;
michael.forbes@spglobal.com
Methodology Contact:Michelle M Brennan, London 44-20-7176-7205;
michelle.brennan@spglobal.com
Matthew B Albrecht, CFA, Englewood 1-303-721-4670;
matthew.albrecht@spglobal.com
Steven Ader, New York 1-212-438-1447;
steven.ader@spglobal.com

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