This article presents updates to S&P Global Ratings' views on the 86 banking systems that it currently reviews under its criteria "Banking Industry Country Risk Assessment Methodology And Assumptions," published on 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).

We typically update this publication every month to summarize our latest BICRA assessments by group and country (table 1), economic and industry risk scores--summarized in chart 1--and components (table 2), and related assessments (government support assessments by region (table 3) and BICRA scores for estimates and regional averages (table 4). All these variables are current as of time of publication of this article, but some may be amended before the publication of our next monthly update.

Latest BICRA Action And Reports

Since we last published the BICRA update on Aug. 29, 2024, we have:

• Finland: We revised some scores on economic-risk related factors;
• Jordan: We revised our BICRA to Group 7 from Group 8 and revised our economic risk to '7' from '8'. We also revised some scores on economic risk-related factors;
• Malaysia: We revised our industry risk to '3' from '4'. We also revised some scores on industry risk-related factors.

Since we last published the BICRA update on Aug. 29, 2024, we also published comprehensive BICRA reports on Cyprus, Hong Kong, Iceland, Liechtenstein, and Malaysia.

Finland

We have kept Finland in BICRA group '2'. The economic and industry risk scores remain '2' and '3', respectively, and we continue to view both trends as stable. We expect Finnish banks will remain resilient amid the ongoing house price correction and overall weak macroeconomic conditions. Robust earnings will endure, and asset quality deterioration will remain manageable for the system. We foresee the house price contraction coming to an end with early signs of increased activity in the housing market as autumn starts. We think that accompanying this, the economy will enter a recovery phase in 2025.

Jordan

We revised our assessment of economic risk to '7' from '8' and reclassified Jordan's banking system as being in group 7 from group 8. Our anchor for banks operating in Jordan has now improved to 'bb' from 'bb-'. We anticipate that economic risk for banks in Jordan will be lower, overall. The positive effect of a more-benign economic environment on business activities should support Jordanian banks' profitability and capital. In particular, we expect more-dynamic business volumes, with annual growth of 4%-5%, given our forecast that interest rates will decrease and economic activity will strengthen, supporting a rise in lending. Tight control over operating costs will help support Jordanian banks' profitability.

Malaysia

We revised our assessment of industry risk to '3' from '4' for Malaysia. Operating conditions are improving for Malaysian banks. The risk of negative intervention from the government has reduced, in our view. Consequently, banks in the country should be better placed to adequately price risks, such that their revenues cover expenses, expected losses, and the cost of capital over an economic cycle without having to take excessive risks.

About BICRAs

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).

A BICRA analysis for a country incorporates the entire country's financial system, taking into account the impact of entities other than banks on the financial system. It also looks at the conditions under which rated and unrated entities operate.

Our analysis of economic risk of a banking sector takes into account the structure, performance, flexibility, and stability of the country's economy, actual or potential imbalances in the economy, and the credit risk stemming from economic participants, mainly households and enterprises.

Our view of industry risk factors in the quality, effectiveness, and track record of bank regulation and supervision, as well as the competitive environment of a country's banking industry, including its risk appetite, structure, risk-adjusted financial performance, and possible distortions in the market. Industry risk also addresses the variety and stability of funding options available to banks, including the role of the central bank and government.

Part of our review involves an evaluation of 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"). Our view of the likelihood of extraordinary government support may influence our issuer credit rating on systemically important institutions in a particular country, according to our financial institutions criteria.

Table 1

Download table here.

Chart 1a

Chart 2a

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

BICRA Estimates And Regional Averages

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 "Risk-Adjusted Capital Framework Methodology," April 30, 2024). 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

Related Criteria And Research

Related Criteria

• Risk-Adjusted Capital Framework Methodology, April 30, 2024
• Financial Institutions Rating Methodology, Dec. 9, 2021
• Banking Industry Country Risk Assessment Methodology And Assumptions, Dec. 9, 2021
• Sovereign Rating Methodology, Dec. 18, 2017

Related Research

• Banking Industry Country Risk Assessment: Cyprus, Sept. 27, 2024
• Banking Industry Country Risk Assessment: Hong Kong, Sept. 24, 2024
• Banking Industry Country Risk Assessment: Iceland, Sept. 17, 2024
• Banking Industry Country Risk Assessment: Liechtenstein, Sept. 16, 2024
• Jordan-Based Arab Bank PLC And Some Branches And Subsidiaries Upgraded; All Outlooks Stable, Sept. 11, 2024
• Reduced Risk Of Government Intervention Is A Positive For Malaysia Banks, Sept. 10, 2024
• Banking Industry Country Risk Assessment: Malaysia, Sept. 10, 2024
• Finnish Banks Show Resilience As Economic Risks Recede; BICRA Group '2' Maintained, Sept. 10, 2024
• Global Banks Country-By-Country Midyear Outlook 2024: Searching For Calmer Waters, July 16, 2024
• Global Banks Midyear Outlook 2024: Searching For Calmer Waters, July 16, 2024