Azerbaijan, Baku, July 23 /Trend A.Akhundov/
Moody's has updated its scenario analyses for banks in Russia and other CIS countries to capture the most recent default and recovery statistics that the rating agency has observed, and to anchor the scenarios against its current macroeconomic expectations and findings of recent crises.
It is stated in an updated scenario analysis of the international rating agency Moody's for the banks in Russia and CIS countries published on Monday.
The rating agency has run the Russian and CIS banking systems through the updated central and adverse scenarios.
"Although the results of the updated scenarios are more severe than the previous ones -- reflecting the general intensification of operating environment risks -- CIS banks' capital positions still remain above the 8-10% regulatory minimum level for each country by year-end 2012 under the central scenario," the statement said.
Moody's says this reflects the banks' healthy recurring revenues and adequate loan-loss provisions.
However, when faced with the pressures outlined in the central scenario, Moody's does not expect that banks will increase their provisioning coverage in line with asset-quality deterioration, rather, the banks are likely to opt for problem-loan restructurings, as they did during the 2008-2009 crisis.
At the same time, under Moody's lower-probability adverse scenario -- which could be triggered by an escalation of the euro area debt crisis -- most CIS banking systems would report capital adequacy ratios lower than regulatory minimums, signalling a need for external capital support. Neither Moody's central nor adverse scenario takes into account any external capital support and both are solely based on the banks' internal capital-generation capacity.
The currently assigned ratings for Russian and CIS banks already incorporate the implications of the rating agency's recalibration of the central scenario analysis. However, Moody's ratings on CIS banks are likely to migrate downwards if the probability of the adverse scenario increases and moves closer to the central scenario.