Vietnam’s risk score falls as nation’s government-bond rating downgraded
The sorry state of the Vietnamese banking sector contrasts with elsewhere in the region.
Moody’s downgraded Vietnam’s foreign- and local-currency government bonds to B2 from B1 last week, negatively affecting its overall risk profile. Vietnam’s five-year yields rose to a two-month high on the back of the news.
The rating agency also downgraded eight of Vietnam’s leading financial institutions, citing a continued deterioration in asset quality and a weaker operating environment, as government support for the banking sector will remain ineffectual.
This is a development that corresponds closely with ECR data. Vietnam’s overall ECR score has continued to fall over each quarter this year. The sovereign’s ECR score fell by 0.8 points from Q2 2012 to 39.6 in September – this falls on the back of a further three points score decrease from Q1.
This leaves Vietnam ranked well into the bottom half of tier four on ECR’s global risk rankings. Vietnam’s position has fallen two places since Q1 2012, to 85 in September. The sovereign now ranks alongside Ukraine, Lebanon and Macedonia.
Vietnam’s bank stability, which is a measure of a country’s banking-sectors strength, is the second-most unstable among the southeast Asian economies, with only Laos’s banking sector waning behind Vietnam’s. In addition, Vietnam’s banking-stability indicator is the lowest among Vietnam’s economic indicators.