International ratings agency Fitch said Lebanese banks had low-level potential vulnerability, similar to their peers in the United States and Germany. In its semiannual risk assessment of 116 banking systems in advanced and emerging economies, Fitch Ratings placed Lebanon’s banking sector among 98 banking systems with a “low vulnerability to potential systemic stress,” the highest category on Fitch’s Macro-Prudential Indicator.
The report is seen as a moral boost to the Lebanese banking sector, which has been criticized by other ratings agencies for its high exposure to the country’s public debt.
President of the Association of Banks in Lebanon Salim Sfeir has cited the Fitch report to emphasize the resilience of local banks.
Byblos Bank’s “Lebanon This Week” bulletin carried the Fitch report in its last issue.
It added that the MPI identifies the buildup of potential stress in banking systems due to a specific set of circumstances. It aims to highlight potential systemic stress that could materialize up to three years after an early warning is first detected.
“As such, it identifies instances of rapid real credit growth over successive two-year periods, along with growth in real property prices, an appreciation in the real exchange rate or a rise in real equity prices. Its assessment is based on three years of annual data, with a trigger in any of the three years determining a country’s MPI score,” the report said.
It said that an MPI score of 1 denoted low potential vulnerability, 2 reflected moderate vulnerability, while 2* denoted moderate vulnerability accompanied by data limitations. A score of 3 reflected a high level of vulnerability to potential systemic stress.
“Fitch has maintained Lebanon’s MPI score since October 2013, while it upgraded Lebanon’s score to 1 from a previous score of 2. As such, Lebanon, along with Angola, Bahrain, Cameroon, Cape Verde, Gabon, Ghana, Iraq, Kenya, Kuwait, Lesotho, Malta, Morocco, Mozambique, Namibia, Nigeria, Oman, Qatar, Rwanda, Saudi Arabia, the Seychelles, South Africa, Tunisia, the UAE, Uganda and Zambia have an MPI score of 1 in the Middle East & Africa region. Other countries in this category include Australia, Austria, Denmark, Finland, France, Germany and the United States,” it said.
The report added that Fitch indicated Lebanon’s banking sector was among 20 banking systems that have a Banking System Indicator of “b.”
The BSI is a measure of a banking system’s intrinsic quality or strength, derived from Fitch’s Viability Ratings for banks. Also in the “b” category were Egypt and Nigeria in the Middle East and Africa region, as well as Armenia, Azerbaijan, the Dominican Republic, Ecuador, Kazakhstan, Sri Lanka and Vietnam, among others.