Bank Credit Rating Evaluation Meetings Also 'Non-Face-to-Face'... Some Schedules Postponed

Switch from In-Person Meetings to Remote Conference Calls
Annual Meetings Postponed Due to COVID-19
"Overseas Meetings in the Second Half Also Impossible"

The office of the international credit rating agency Standard & Poor's (S&P) in New York. (EPA=Yonhap News)

[Asia Economy Reporter Park Sun-mi] The global resurgence of the novel coronavirus infection (COVID-19) has caused disruptions in the credit rating evaluations of domestic banks.

According to the banking sector on the 31st, Standard & Poor's (S&P), one of the three major credit rating agencies, has notified that it will postpone the annual consultation meetings with the five major banks, originally scheduled for September, to November. The meeting format will also be changed from face-to-face meetings to conference calls. Even though it is a conference call, the evaluators from the rating agency need to gather in one place, which caused concerns amid the resurgence of COVID-19.

Before the spread of COVID-19, credit rating agency inspection teams visited Korea once a year to hold annual consultation meetings with banks for credit rating evaluations. Banks prepared materials based on these visits and devised strategies to receive or maintain favorable ratings and outlooks.

However, this year, due to the spread of COVID-19, both the schedule and format of the annual consultation meetings between international credit rating agencies and domestic banks have changed. Other banks that completed their annual consultation meetings between April and June also applied the unusual format of conference calls instead of face-to-face meetings, considering the COVID-19 situation. Some meetings originally planned for early in the year were postponed and only held in June for credit rating evaluations.

A bank official said, "Conducting evaluation meetings in the form of conference calls rather than face-to-face meetings inevitably places a burden on the banks being evaluated," adding, "There are limitations in conveying the bank's position effectively through conference calls despite preparing thoroughly." Another bank official stated, "Since international rating agencies issue credit rating reports, banks hold separate meetings in places like Hong Kong after the annual consultations to explain their positions," but added, "However, due to COVID-19, overseas meetings in the second half of the year have not been scheduled."

The spread of COVID-19 has not yet directly affected the credit ratings or outlooks of the five major domestic banks. All five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?have been assigned A or A+ ratings by S&P. The rating outlooks are mostly concentrated on 'Stable' among the three categories: 'Positive,' 'Stable,' and 'Negative.'

However, if the COVID-19 resurgence continues, the exposure of banks to small and medium-sized enterprise loans may increase, and the extension of principal maturities and interest payment deferrals on 'COVID loans' could damage the asset soundness of banks. Therefore, it is uncertain how long the current ratings and outlooks can be maintained. In March, when COVID-19 spread rapidly in local areas, Moody's, a credit rating agency, began reviewing the possibility of downgrading the credit ratings of domestic regional banks.

This content was produced with the assistance of AI translation services.