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Ratings are through-the-cycle, however that does not prevent them from being downgraded if key metrics are not assessed as returning to levels appropriate for higher rating levels within a timeframe of around two years.

Coronavirus Driving Negative Rating Actions on ASEAN Banks
Photo: AP
 The risks facing ASEAN banks have increased substantially amid the coronavirus-induced recession, with Fitch Ratings downgrading the Issuer Default Ratings (IDRs) of around 20% of our ASEAN banks portfolio since the beginning of March.
Ratings are through-the-cycle, however that does not prevent them from being downgraded if key metrics are not assessed as returning to levels appropriate for higher rating levels within a timeframe of around two years.
Fitch affirmed around 80% of our ASEAN banks portfolio ratings in this period: 41% of these incurred a downward outlook revision, either reassessed to negative from stable or to stable from positive. We now have around 30% on negative outlook or rating watch negative.
There have been differing underlying drivers of these rating and outlook changes. Nearly two thirds of the ratings assessed have been driven by institutional support from foreign parents - especially in Indonesia - or the relevant sovereign rather than the intrinsic credit profile. We have rating action that has followed action on the sovereign, for example recently when we reassessed the Philippines, Thailand and Vietnam sovereign rating outlooks to Positive from Stable and Malaysia to Negative from Stable.
There have also been changes to the banks' Viability Ratings (VRs), which in turn have driven the IDRs if they are not support driven. The VRs have been driven by weakening operating environments and also deterioration in the banks' financial profiles, in particular asset quality and earnings and profitability. Fitch has downgraded the operating environment for all Fitch-rated ASEAN banking markets - except Singapore, which remains on negative outlook.

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