Moody's says Asian bank exposure to Dubai is relatively small.

Byline: [e-mail] (Staff Writer)

Moody's said that no rating actions have been taken on Asian banks as a result of the requested standstill on selected Dubai World debt payments. Nor does Moody's expect that there will be any need for negative rating actions on Asian banks at a later date, barring a massive expansion in the scope of restructurings in Dubai.

The Asian banks have billions of US dollars of exposures to UAE entities, but this represents a small per cent of bank assets. To date, Moody's has found no Asian bank to have sufficiently high levels of exposure to members of the Dubai World group to warrant any ratings actions.

Even those banks with the larger exposures to Dubai World firms, could fully provision those exposures and still report a profit for the year. In fact, Moody's believes that the vast majority of Asian banks will not need to set aside more than a couple of weeks' pre-tax pre-provision profits to provision possible losses stemming from the requested standstill and restructuring of Dubai World entities. This estimate is based on an assumed 30 per cent loss on each bank's total Dubai World exposures.

These conclusions are based on a large, but preliminary survey. It is possible that some smaller Asian banks may yet reveal relatively larger Dubai World exposures, but Moody's would be very surprised if any Asian bank had total Dubai World exposures that could not be fully covered by a year's earnings. Again assuming losses are in the 30 per cent range, no more than 30 per cent of earnings would have to go toward provisioning.

Nor do Asian banks appear to have much indirect exposure to Dubai World by way of their corporate borrowers. The region's bankers are checking their loan portfolios, but for the most part Asian heavy equipment exporters and global construction companies are not unduly reliant on Dubai World customers.

The above remarks apply to all the banks in East Asia, South Asia, Australia and New Zealand.

2009 CPI Financial. All rights reserved.

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