Economic Research | Lebanon This Week | Lebanon This Week 555 | Lebanese banking sector has low level of potential vulnerability, similar to sectors in the U.S. and Germany | Lebanon | Byblos Bank

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Lebanon This Week 555

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Lebanese banking sector has low level of potential vulnerability, similar to sectors in the U.S. and Germany

In its semi-annual risk assessment of 115 banking systems in advanced and emerging economies, Fitch Ratings placed Lebanon's banking sector among 91 banking systems with a "low vulnerability to potential systemic stress", the highest category on Fitch's Macro-Prudential Indicator (MPI). The MPI identifies the build-up of potential stress in banking systems due to a specific set of circumstances. It aims to highlight potential systemic stress that could materialize up to three years after an early warning is first detected. It said that an MPI score of '1' denotes low potential vulnerability, a score of '2' reflects moderate vulnerability, while a score of '2*' denotes moderate vulnerability accompanied by data limitations, and a score of '3' reflects a high level of vulnerability to potential systemic stress. 

Lebanon's MPI score has been unchanged since October 2013, when Fitch upgraded Lebanon's score to '1' from a previous score of '2'. As such, Lebanon, along with Angola, Bahrain, Cameroon, Cape Verde, Gabon, Iraq, Kenya, Kuwait, Lesotho, Morocco, Namibia, Nigeria, Rwanda, Saudi Arabia, the Seychelles, South Africa, Tunisia, the UAE, Uganda and Zambia have an MPI score of '1' in the Middle East & Africa region. Other countries in this category include Australia, Canada, Denmark, Finland, France, Germany and the United States.

In parallel, the agency indicated that Lebanon's banking sector was among 16 banking systems that have a Banking System Indicator (BSI) of 'b'. The BSI is a measure of intrinsic banking system quality or strength, derived from Fitch's Viability Ratings for banks.  Lebanon came in the 'b' category, along with Egypt and Nigeria in the Middle East & Africa region, as well as Armenia, Azerbaijan, the Dominican Republic, Ecuador, Kazakhstan, Sri Lanka and Vietnam, among others. Fitch said that 62% of banking systems in developed countries have BSIs of 'a' or higher. It added that only four banking sectors in developed economies have a BSI of 'aa' and only one sector has a BSI of 'ccc' or lower. Also, it indicated that the typical level of banking strength in emerging markets is weaker and is distributed evenly across the 'bbb', 'bb' and 'b' categories, with only one banking sector in the 'a' category and one sector in the 'ccc' or lower categories. Lebanon is one of 12 countries with an MPI score of '1' and a BSI strength of 'b'.
 
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