Moodys first downgrades Pakistans rating, now its top five banks

[AsifAmeer]

http://dawn.com/2012/07/18/pakistans-top-five-banks-downgraded-by-moodys/

LIMASSOL: Moodys Investors Service on Tuesday, downgraded the local-currency deposit ratings of the top five Pakistani banks by one notch to B3, with negative outlook, from B2, and lowered their standalone credit assessments to caa1 from b3.

The affected banks are Allied Bank Limited, Habib Bank Ltd, Muslim Commercial Bank Limited, National Bank of Pakistan and United Bank Ltd.

Moodys also downgraded the foreign-currency deposit ratings of the five banks by two notches to Caa2, from B3, to reflect the lowering of the foreign-currency deposit ceiling in Pakistan, which is the highest rating that can be assigned to a foreign-currency deposit obligation of a domestic bank.

The short-term ratings have been affirmed.

The full list of affected ratings can be found in this press release.

These actions follow the downgrade of Pakistans government bond ratings to Caa1, with negative outlook, from B3, on 13 July 2012, and reflect the significant linkages between the credit profiles of Pakistani banks and sovereign credit risk.
Courtesy Moodys

Commentary: Whatever I suggested in my article The LOOMING CURRENCY CRISIS IN PAKISTAN is starting to take shape. Moody's is famous for being late on every party! I dont know when the sh!t will hit the fan. I just think I have an idea how it will.

 

[biomat]

I dont know when the sh!t will hit the fan. I just think I have an idea how it will.
Bro [MENTION=24375]AsifAmeer[/MENTION]
Assalam-o-alaikum
Please elaborate what u mean by this...

 

[aqibarain]

That proves.... Zinda hi BB zinda hi....

 

[Vitamin_C]

I dont know when the sh!t will hit the fan. I just think I have an idea how it will.
Bro @AsifAmeer
Assalam-o-alaikum
Please elaborate what u mean by this...

When the sh!t hits the fan its going to come on all of us so either you can stand here waiting for it to hit you or you can run for cover.

 

[Keepinformed]

I dont know when the sh!t will hit the fan. I just think I have an idea how it will.
Bro @AsifAmeer
Assalam-o-alaikum
Please elaborate what u mean by this...

It means that your term deposits to the bank might be in trouble if more funds do not start coming in quick.

The money you place in the banks is lent out to others such as governments, businesses and individuals. When the government, businesses and individuals start defaulting on their loans then then bank is in trouble.


In Pakistan, banks are taking money from the general public and lending it out to the government of Pakistan.

Government of Pakistan is then using that money for their own expenses and is unable to repay the banks.

There is slight difference though. In Pakistan there is a huge cash flow advantage to banks which comes in the form of drug and weapons money.

Moody's may not be entirely aware of the inner workings of local Pakistani banks. They mainly look at debts owed to the bank versus the debtors (government of pakistan) ability to pay back. The black market (if i were a bank) is hidden. Pakistan is not included in the list of countries that prevents money laundering.

http://www.fatf-gafi.org/topics/high-riskandnon-cooperativejurisdictions/

Also these Moody type rating companies were also the ones that approved D grade mortgage back securities as A grade. Moodys is to the financial world as Freeha Pervez is to Lux style awards.

In short there is not much information available to deduce a panic run to the bank.

2009 bank crisis was saved by drug and illegal arms money according to a UN official.

http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims

Pakistan is a HUB of drug and weapons transportation market.

This country is not poor. Just has poor managers sitting on the top.

 

[AsifAmeer]

I dont know when the sh!t will hit the fan. I just think I have an idea how it will.
Bro @AsifAmeer
Assalam-o-alaikum
Please elaborate what u mean by this...

When the sh!t hits the fan its going to come on all of us so either you can stand here waiting for it to hit you or you can run for cover.

It means that your term deposits to the bank might be in trouble if more funds do not start coming in quick.

The money you place in the banks is lent out to others such as governments, businesses and individuals. When the government, businesses and individuals start defaulting on their loans then then bank is in trouble.


In Pakistan, banks are taking money from the general public and lending it out to the government of Pakistan.

Government of Pakistan is then using that money for their own expenses and is unable to repay the banks.

There is slight difference though. In Pakistan there is a huge cash flow advantage to banks which comes in the form of drug and weapons money.

Moody's may not be entirely aware of the inner workings of local Pakistani banks. They mainly look at debts owed to the bank versus the debtors (government of pakistan) ability to pay back. The black market (if i were a bank) is hidden.

In short there is not much information available to deduce a panic run to the bank.

2009 bank crisis was saved by drug and illegal arms money according to a UN official.

http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims

Pakistan is a HUB of drug and weapons transportation market.

This country is not poor. Just has poor managers sitting on the top.

Biomat, I have laid out how its going to play out in my article. It will ultimately be on the State Bank of Pakistan to either save the Rupee from crashing or the Banks/Govt.

There is no doubt in my mind that sooner or later the foreign currency accounts will be seized by the State Bank when they get their margin call from Bank of International Settlement or whichever dealer they may be using. So be careful with your foreign assets.

Plus, there are 2 kinds of default. One's going deadbeat and the other is thru inflation. Govts dont generally default on their currency denominated debt. They simply inflate their way out of it. But its a different case when the debt is foreign denominated debt. Look up the Net Foreign Assets for FY12 in
http://www.sbp.org.pk/ecodata/BroadMoney_M2.pdf

The NFA goes from Rs 234972 Million (FY11) to NEGATIVE Rs253619 Millions. Since its net foreign assets, lets call it what it is.. Its Dollar denominated debt of about $2.67 BILLION at Rs95/dollar. As Rupee depreciates, this debt gets bigger and bigger. Inflating their way out is not an option around this time for the Pak Govt.

Remember how Pakistan openned its supply routes? US actually promised Pakistan that US will take care of PKR/USD parity too.... So when you have an elephant coming in the room, rules of economics go out the window.. Lekin matters can only be delayed not avoided.

I say, give ur take 18 months.

 

[hans]

Very well said !!!

 

[only_truths]

I appreciate your concerns and wish Pakistan gets over it.

But for many in Pakistan it is a Yahoodi American Indian saazish.

 

[AsifAmeer]

Yahoodi Googley American Indian saazish saazish eak la-ilaaj marz hai.

I appreciate your concerns and wish Pakistan gets over it.

But for many in Pakistan it is a Yahoodi American Indian saazish.