S&P measuring banking sectors' risks

Banking sector has “extremely high” credit risk due to sovereign exposure, report says

Lebanon has an "extremely high” credit risk in the economy, Standard & Poor's Ratings Services agency said. This assessment is, according to the agency, attributable to the “sizable exposure of local banks to their highly indebted sovereign.”

Standard & Poor’s (S&P) issued its ‘Banking Industry Country Risk Assessments’ (BICRAs) for 86 countries on November 9. The report assesses countries on a scale from one to ten, ranging from the lowest-risk banking systems (group 1) to the highest-risk (group 10).

The positioning of Lebanon’s banking sector was revised to ‘Group 8’, up from ‘Group 9’ in an earlier assessment.
Political risk remains a constraint in Lebanon, the report said. However, it said that the government is likely to support private banks in times of financial distress.

Lebanon got a high risk rating on the ‘economic imbalances’ factor.

The report gave Lebanon an intermediate risk on ‘system-wide funding’, which assesses the relative stability of a banking sector's funding sources and its access to alternative funding sources.