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Announcement:

Moody's revises assumptions behind its estimates of Ukrainian banks' credit losses

Global Credit Research - 28 Oct 2009

Moscow, October 28, 2009 -- As part of its global framework for estimating banks' credit losses and their effect on ratings, Moody's Investors Service has revised its stress-test assumptions under its base case scenario. The new Special Comment is entitled "Moody's Revises Stress-Test Assumptions for Ukraine" and is available on www.moodys.com.

Ukraine continues to be severely affected by the global financial crisis and is suffering from a particularly deep recession, with real GDP likely to fall by 12% this year. Moody's notes that, under the adverse macroeconomic conditions, Ukrainian borrowers are finding it difficult to service their debt, especially after the 61% devaluation of the local currency against the US dollar in 2008, which has inflated the debt service burden for loans that are denominated in foreign currency. These loans represent over 50% the loan portfolio of Ukrainian banks.

"The deterioration of asset quality in certain asset classes in Ukraine has exceeded our expectations as a result of the macro-economic weakness. This is particularly the case for retail loans such as mortgages, other secured consumer loans and unsecured consumer loans. We have therefore revised our stress-test assumptions to reflect the higher-than-expected risk in Ukrainian banks' loan books," says Yaroslav Sovgyra, a Moody's Vice President-Senior Credit Officer and lead analyst for Ukrainian financial institutions.

The change in Moody's stress-test assumptions for Ukraine will not trigger further rating actions. Moody's has already taken a number of rating actions on banks with high estimated credit losses that are likely to suffer a decline in capital. The risk of transition to lower ratings is therefore lower for those banks. Certain banks carry a negative outlook or have been placed on review for possible downgrade on the basis of the rating agency's stress-test analysis.

The detailed rationale behind Moody's assumptions was presented in the Special Comment "Estimating Bank Credit Losses for Financial Institutions in the CIS", published in July 2009. The report was based on information that was available at the time of writing and noted that the rating agency would update the assumptions behind expected losses as the operating environment evolves.

Moody's uses stress testing to understand the sensitivity of banks' capital positions to a range of credit loss estimates. The overall global framework is explained in detail in the Special Comment "Moody's Approach to Estimating Bank Credit Losses and their Impact on Bank Financial Strength Ratings", published in May 2009.

*****

NOTE TO JOURNALISTS ONLY: For more information please contact New York Press Information +1-212-553-0376; EMEA Press Information in London +44-20-7772-5456; Juan Pablo Soriano in Madrid +34-91-310-1454; Alex Cataldo in Milan +39-02-914-81-100; Eric de Bodard in Paris +331-5330-1076; Detlef Scholz in Frankfurt +49-69-707-30-700; Mardig Haladjian in Limassol +357-25-586-586; Alex Sazhin in Moscow +7 495 228 60 60; Petr Vins in Prague +4202 2422 2929; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Hong Kong Press Information +852-2916-1150; Hector Lim in Sydney +612 9270 8102; Luiz Tess in São Paulo +5511-3043-7300; Alberto Jones Tamayo in Mexico City +5255-1253-5700; Daniel Rúas in Buenos Aires +54 11-4816-2332 ext. 105; Leon Classen in Johannesburg +27-11-217-5470; Jehad el-Nakla in Dubai +971 4 401 9536; or visit our web site at www.moodys.com

Moscow
Yaroslav Sovgyra
VP - Senior Credit Officer
Financial Institutions Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091

London
Yves Lemay
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's revises assumptions behind its estimates of Ukrainian banks' credit losses
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© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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