The current property boom is unlikely to hurt the risk ratings of Singapore’s banks, according to leading ratings agency Moody’s Investors Service.

The current property boom is unlikely to hurt the risk ratings of Singapore’s banks, according to leading ratings agency Moody’s Investors Service.

Banks are ‘not getting too involved in the property market’, Ms Deborah Schuler, a Moody’s senior vice-president, said.

She told reporters that banks in Singapore typically ‘finance only the largest developers… who have the resources to have staying power in a downturn and complete buildings’.

Banks have also been more cautious about the developers they have on their books since the last market peak in 1996, she said.

She added that banks take on mortgages that ‘tend to be very low risk’.

The biggest concern ‘would be in mortgages as interest rates in the region rise’, she said.

So far, however, ‘liquidity in the system’ has been good, Ms Schuler said.

Singapore’s banking sector won high ratings from Moody’s, while its outlook is also stable because of the strong balance sheets and improved risk management of banks.

Moody’s maintained stable or stable-to-positive outlooks for the 16 banking systems it rates in the Asia-Pacific.

Among the South-east Asian banking systems rated by Moody’s, those of Vietnam and Indonesia received positive outlooks.

The report highlighted certain potential problems that could affect the banking sector in Asia, including rising energy prices and the risk that Asia’s business cycle may reach its peak in a year or two.

In a separate report, Moody’s maintained the highest possible credit rating for the Singapore Government. The outlook for it is also stable.

This was attributed to the continued fiscal strength of the public sector and strong external balance of payments.

Source: The Straits Times, 14 July 2007