Moody's says S. Korean banks' health will determine sovereign ratings

SEOUL, Sept. 16 (Yonhap) -- Global credit appraiser Moody's Investor Service said on Wednesday the health of South Korea's financial system will be the key factor in determining the nation's sovereign credit ratings.

"Major concerns (to determing South Korean credit ratings) is how strong the
financial system will be in the future," Thomas Byrne, Senior Vice President of
Moody's, told reporters here.
In case of a global dollar market freeze-up, local banks' heavy dollar-exposure
could pose a threat to the nation's economy, noted Byrne, adding "if banking
shows weakness, government has to intervene then that leads to extra burden on
the government."
Currently, South Korean banks have four risk factors, he said, citing foreign
currency liquidity management, volatility of foreign exchange rates, risk
governance effectiveness, and privatization or reform of large financial
institutions.
Byrne's comment came a day after Moody's projected the South Korean economy will
grow 3 percent next year with a 4-5 percent expansion forecast for the mid-term
of five years.
He warned, however, for Korea to achieve the upbeat growth, a recovery in the
U.S. and European economies is a prerequisite because of the nation's heavy
dependence on exports.
"You need to ensure global corporations invest so you need business friendly
government and predictable policies," Byrne said.
Touching on the geopolitical risks stemming from North Korea, Byrne said even
without progress in the inter-Korean relations Moody's could upgrade South Korean
credit ratings when improvements are made in economic growth, the government's
financial strength or stabilization in financial factors. South Korea has a
ratings rate of A1 to A3, he added.
pbr@yna.co.kr
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