15 nations"face credit bust danger"


The US and China are among the countries with vulnerable banking systems, says ratings agency S&P


LONDON -- Fifteen countries worldwide, from the US to China, are vulnerable to stresses in their financial systems which could, in the worst case, lead to a credit""bust'', ratings agency Standard & Poor's (S&P) warned yesterday.

It said that overly rapid credit growth in the US, Ireland, the Netherlands and Panama meant that all four were vulnerable to asset quality deterioration.

But it did caution that its report was based on what S&P termed""severe'' scenarios which, in many cases, may not actually occur.

The report said the 15 could be""potential candidates for financial system failures as they are either experiencing, or are vulnerable to, a credit bust''.

""Some countries are showing the classic signs of excessive leveraging such as huge credit growth, corporate and household indebtedness, asset price inflation, and the deterioration of banks' external funding positions,'' said Ms Andrea Hosso, associate director at S&P's financial institutions team.

The latest figures from the US showed that consumers expanded credit in May at the strongest rate in four months, taking out more loans to buy items such as new cars despite rising interest rates.

Ireland and the Netherlands are also seeing rapid economic expansion.

China, the Czech Republic, Slovakia and Romania are all rendered vulnerable by delays in implementing the restructuring of companies and the banking system.

Commenting on China, S&P said that""restructuring has not been deep enough, however, to improve efficiency radically''.

In the recovering but still wounded Asian Tigers, Indonesia, South Korea and Thailand are still suffering from the aftermath of the financial crisis, with high levels of non-performing loans and capital constraints.

Japan is also suffering from the bursting of its asset bubble, and its financial system has been in distress since the early 1990s.

""Now along the road to recovery, the Japanese system still faces the same type of difficulty as the other three -- protracted restructuring of the leveraged corporate sector and a still-high level of problem assets that hinder the banks from rebounding,'' S&P said. --Reuters


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