Moody s maintains negative outlook for Hungarian banking system
<p>Budapest, July 8, 2010 (MTI-ECONEWS) - Moody s Investors Service said that it was maintaining its negative outlook for the Hungarian banking system, to reflect primarily the adverse domestic and global economic conditions that are weighing on the banks operating environment and the risks embedded within the banking system.</p>
Although the stability of the Hungarian banking sector has improved in comparison with H1 2009, many of the risks remain, and as a result Hungary s banking system is still viewed as one of the more fragile in Central and Eastern Europe (CEE), Moody s said in its new Banking System Outlook on Thursday.
Moody s outlook for the Hungarian banks expresses the rating agency s view on the likely future direction of fundamental credit conditions in the industry over the next 12 to 18 months. It does not represent a projection of rating upgrades versus downgrades.
In the report, Moody s identifies the main risks for the Hungarian banking system as being the country s weak, albeit improving, economic environment, the limited scope to use fiscal measures to support domestic demand, and fragile market confidence due to high external and government debt. Hungary s economic growth is expected to remain sluggish in 2010, if any, relying primarily on exports as domestic demand remains very weak. The unemployment rate is likely to keep growing in 2010, and bankruptcy rates are expected to remain high. These issues are further aggravated by the risks embedded in the banking system, mainly the large share (70pc) of foreign-currency loans to retail clients and the higher dependence on foreign-currency wholesale funding compared with some other countries in the region.