This article presents updates to S&P Global Ratings' views on the 86 banking systems that it currently reviews under its criteria "Banking Industry Country Risk Assessment Methodology And Assumptions," published on Dec. 9, 2021, that it uses primarily when applying its methodologies to develop the stand-alone credit profile and issuer credit rating on a financial institution ("Financial Institutions Rating Methodology," Dec. 9, 2021).

We typically update this publication every month to summarize our latest BICRA assessments by group and country (table 1), economic and industry risk scores--summarized in chart 1--and components (table 2), and related assessments (government support assessments by region (table 3) and BICRA scores for estimates and regional averages (table 4). All these variables are current as of time of publication of this article, but some may be amended before the publication of our next monthly update.

Latest BICRA Action And Reports

Since we last published the BICRA update on Sept. 27, 2024, we have:

• Chile: revised our economic risk trend to stable from negative;
• Egypt: revised our industry risk score to '8' from '9. We also revised some scores on industry risk-related factors and revised our economic risk trend to positive from stable;
• Mongolia: revised our economic risk score to '8' from '9'. We also revised some scores on economic risk-related factors, revised our industry risk trend to positive from stable, and changed our government support assessment to supportive from uncertain;
• Morocco: revised some scores on economic risk-related factors;
• Oman: revised our BICRA to group 6 from group 7, and our economic risk score to '6' from '7'. We also revised some scores on economic risk-related factors and revised our economic risk trend to stable from positive; and
• Portugal: revised our BICRA to group 4 from group 5, and our industry risk score to '4' from '5'. We also revised some scores on industry risk-related factors and revised our industry risk trend to stable from positive.

Since we last published the BICRA update on Sept. 27, 2024, we also published comprehensive BICRA reports on Cambodia, Georgia, Kuwait, Mexico, Portugal, Thailand, the U.K., and the U.S.

Chile

For Chile, we revised our trend for economic risk to stable from negative. Chilean financial institutions have remained resilient--given sound profitability, manageable asset quality metrics, and healthy funding structure and capitalization--despite the country's challenging economic and political scenario since the social unrest of 2019.

Egypt

We revised our assessment of industry risk to '8' from '9' for Egypt. Following the exchange rate liberalization in early March 2024, foreign currency inflow increased significantly, helping the Egyptian banking sector shift back to a net external asset position. At the same time, we revised our economic risk trend to positive due to the system's resilient asset quality and receding economic imbalances.

Mongolia

We revised our assessment of economic risk to '8' from '9'. Economic risks for Mongolian banks have reduced, in our view. The country has a promising economic outlook. We forecast its real GDP growth will average about 6% annually through 2027, backed by robust exports of commodities such as coal and copper. Moderating inflation and higher public sector wages have also increased household consumption.

The industry risk trend of the banking sector is also improving. This is in view of Mongolia's evolving institutional framework, although the banking regulations in the country are relaxed compared with the international standards. The Mongolian government is likely to be supportive of banks. This is in view of the government's materially improved fiscal position amid favorable economic conditions.

Morocco

We have kept Morocco in BICRA group 7. The economic and industry risk scores remain '7' and '6', respectively, and we continue to view both trends as stable. We expect Moroccan banks to benefit from reduced economic imbalances thanks to the stabilizing real estate sector. We expect lending growth to accelerate because of somewhat higher economic growth and asset quality to slightly improve.

Oman

We revised our assessment of economic risk to '6' from '7' for Oman and reclassified Oman's banking system as being in group 6, from group 7. Our anchor for banks operating in Oman has now improved to 'bb+' from 'bb'. We expect Omani banks' credit losses to stabilize amid reducing economic imbalances and a more supportive operating environment. Structural reforms have helped to improve the financial position of the Omani government and its related entities and laid the foundation for stronger economic resilience.

Portugal

We revised our assessment of industry risk to '4' from '5' for Portugal and reclassified Portugal's banking system as being in group 4, from group 5. Our anchor for banks operating in Portugal has now improved to 'bbb' from 'bbb-'. Portuguese banks have maintained their solid funding profiles and benefit from stronger access to foreign capital markets. We do not expect major changes ahead. In addition, banks repaid almost all of the remaining targeted longer-term refinancing operations in the first months of 2024, while maintaining ample liquidity (the system's liquidity coverage ratio stood at 273% at end-June 2024).

About BICRAs

S&P Global Ratings uses its BICRA economic risk and industry risk scores to determine the anchor for a financial institution, which is the starting point of a rating (see paragraph 7 in the financial institutions criteria). Our BICRA criteria evaluate and compare the relative strength of global banking systems. BICRA scores are on a scale from 1 to 10 (see table 1), with group 1 representing the lowest-risk banking systems and group 10 the highest-risk ones (see paragraph 4 in the BICRA criteria).

A BICRA analysis for a country incorporates the entire country's financial system, taking into account the impact of entities other than banks on the financial system. It also looks at the conditions under which rated and unrated entities operate.

Our analysis of economic risk of a banking sector takes into account the structure, performance, flexibility, and stability of the country's economy, actual or potential imbalances in the economy, and the credit risk stemming from economic participants, mainly households and enterprises.

Our view of industry risk factors in the quality, effectiveness, and track record of bank regulation and supervision, as well as the competitive environment of a country's banking industry, including its risk appetite, structure, risk-adjusted financial performance, and possible distortions in the market. Industry risk also addresses the variety and stability of funding options available to banks, including the role of the central bank and government.

Part of our review involves an evaluation of the capacity and willingness of sovereigns (see table 3) to support failing banks (or nonbank financial institutions where applicable) during a crisis based on their systemic importance, classifying sovereigns into three groups: highly supportive, supportive, and uncertain (see paragraph 225 in the "Financial Institutions Rating Methodology"). Our view of the likelihood of extraordinary government support may influence our issuer credit rating on systemically important institutions in a particular country, according to our financial institutions criteria.

Table 1

Table 2

Table 2

Download table here.

Chart 1a

Chart 2a

We assess the capacity and willingness of sovereigns (see table 3) to support failing banks (or nonbank financial institutions where applicable) during a crisis based on their systemic importance, classifying sovereigns into three groups: highly supportive, supportive, and uncertain (see paragraph 225 in the "Financial Institutions Rating Methodology").

Table 3

BICRA Estimates And Regional Averages

Countries for which we do not perform BICRAs are assigned estimates or proxies (depending on the magnitude of rated entities' aggregate exposure to issuers in these jurisdictions) for the purpose of computing risk-adjusted capital ratios. These estimates are made using a simplified BICRA analysis for jurisdictions that rated banks have significant aggregate exposure to--typically of US$5 billion or more (across all the entities we rate). We may also perform a BICRA estimate if rated banks' aggregate exposure is not significant, but we consider it appropriate to assign an estimate. Our BICRA proxies are usually calculated for jurisdictions for which global exposure is not very significant (i.e., typically below US$5 billion). The proxies are based on our foreign currency sovereign rating on the country for which we estimate the BICRA and economic and industry risk scores (see paragraph 12 in "Risk-Adjusted Capital Framework Methodology," April 30, 2024). The BICRAs, economic risk scores, equity market groups (see paragraph 125), and long-term foreign currency sovereign credit ratings that we assign to groups of countries and to regions represent the GDP-weighted average of BICRAs, economic risk scores, equity market groups, and long-term foreign currency sovereign credit ratings on the countries in these groups and regions (see paragraph 151 in "Risk-Adjusted Capital Framework Methodology").

Table 4

Related Criteria

• Risk-Adjusted Capital Framework Methodology, April 30, 2024
• Financial Institutions Rating Methodology, Dec. 9, 2021
• Banking Industry Country Risk Assessment Methodology And Assumptions, Dec. 9, 2021
• Sovereign Rating Methodology, Dec. 18, 2017

Related Research

• Banking Industry Country Risk Assessment: Thailand, Oct. 29, 2024
• Banking Industry Country Risk Assessment: Cambodia, Oct. 29, 2024
• Banking Industry Country Risk Assessment: Mexico, Oct. 28, 2024
• Outlooks On 12 Chilean Financial Institutions Revised To Stable From Negative On Operating Resilience; Ratings Affirmed, Oct. 28, 2024
• Receding Economic Imbalances In Morocco Will Support Moroccan Banks' Future Performance, Oct. 24, 2024
• Ratings On Three Egyptian Banks Affirmed On Improved Operating Environment; Outlook Positive, Oct. 24, 2024
• Banking Industry Country Risk Assessment: United Kingdom, Oct. 23, 2024
• Banking Industry Country Risk Assessment: Georgia, Oct. 22, 2024
• Banking Industry Country Risk Assessment: Kuwait, Oct. 22, 2024
• BankMuscat S.A.O.G. Upgraded To 'BBB-/A-3' On Receding Economic Imbalances; Outlook Stable, Oct. 18, 2024
• Banking Industry Country Risk Assessment: U.S., Oct. 14, 2024
• Two Mongolian Banks Upgraded To 'B+' On Improved Business Stability; Outlooks Stable, Oct. 9, 2024
• Banking Industry Country Risk Assessment: Portugal, Oct. 7, 2024
• Various Rating Actions Taken On Four Portuguese Banks On Stronger Systemwide Funding Dynamics, Oct. 4, 2024
• Global Banks Country-By-Country Midyear Outlook 2024: Searching For Calmer Waters, July 16, 2024
• Global Banks Midyear Outlook 2024: Searching For Calmer Waters, July 16, 2024