(The following statement was released by the rating agency)
Oct 08 - In its published report titled " Banking Industry Country Risk Assessment: CzechRepublic," Standard & Poor's Ratings Services said that the Czech banking sector's mainstrengths are its solid core customer deposit base, industry stability and strong risk-adjustedprofitability, and the country's prudent macroeconomic policies and soundgovernment finances.
The Czech banking system's main weaknesses, in our opinion, are the country'sreliance on external developments for consumer and business confidence; thelarge share of lending to small and midsize enterprises in domestic banks'loan books, which inflates credit risk in downturns; and risks associated withthe deteriorating creditworthiness of banks' foreign parents.
We continue to rank the Czech Republic in Banking Industry Country RiskAssessment (BICRA) group '4' along with countries such as Slovakia, Israel,Italy, Taiwan, South Africa, and Peru.
Our criteria define the BICRA framework as one "designed to evaluate andcompare global banking systems." A BICRA analysis for a country covers ratedand unrated financial institutions that take deposits, extend credit, orengage in both activities. The analysis covers the entire financial system ofa country while considering the relationship of the banking industry to thefinancial system as a whole. BICRA scores range from '1' to '10', with thelowest-risk banking systems in group '1' and the highest-risk in group '10'.The BICRA comprises two main areas of analysis: "economic risk" and "industryrisk." We have assigned scores of '4' to the Czech Republic in both of theseareas.