Vietnam credit rating cut one rank by S&P on risks to nation's bank system

Vietnam’s long-term foreign currency sovereign credit rating was lowered to BB- from BB by Standard & Poor’s on concern over the country’s banking system.

The ratings company said in a statement today “a greater susceptibility of Vietnam’s banking system to a financial or economic shock” prompted the downgrade. The banking system would require direct government support if such shocks materialized, it said, with associated contingent liabilities to the government potentially amounting to as much as 60 percent of gross domestic product.

Vietnam’s new foreign-currency rating puts the country on par with Bangladesh and Mongolia. The outlook on the long-term credit ratings is negative. Vietnam’s short term ratings have been affirmed at B.

Fellow ratings company Moody’s Investor Services Dec. 15 cut Vietnam’s sovereign credit rating to B1 from Ba3, citing the risk of a balance of payments crisis and a drop in foreign reserves as inflation accelerates and the nation’s currency weakens.

Bloomberg

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