S&P: Brexit effect limited - Solomon Star News

S&P: Brexit effect limited

29 June 2016

Suva (Fiji Times) - IN the near term, the direct real impact on Asia-Pacific economies from Brexit is likely to be limited since the relevant linkages are weak.

This was revealed by Standards and Poor's Credit Rating Services in a report on Brexit Impact on Asia-Pacific, including Fiji, is largely credit neutral.

Brexit is the abbreviation of "British exit", which refers to the June 23, 2016 referendum by British voters to exit the EU.

Standards and Poor's stated that Brexit was expected to be challenging, but not likely to have a widespread near-term negative rating consequences for home-grown Asia-Pacific banks and other financial institutions, albeit it's still early days because the geopolitical ramifications of Brexit are yet to fully play out.

"We believe that ratings on some Asia-Pacific financial institutions that have relatively higher direct exposures to the United Kingdom or closer linkages to the UK than their peers may face rating pressure," it said in a report.

"That said, the direct exposures of most Asia-Pacific financial institutions to the UK appear to be manageable at current rating levels.

"Still, potential credit quality problems may arise because the region's financial institutions' indirect exposures related to the eventual fallout from Brexit could be meaningful and maybe difficult to predict."

In addition, it said, the credit quality of Asia-Pacific subsidiaries of major UK financial institution could be impacted by the Brexit fallout noting that some of these subsidiaries are significant institutions in the Asia-Pacific markets in which they are based.

While they expect minimal direct impact on subsidiaries' stand-alone credit strengths because of Brexit, a concern is the potential that credit issues at their UK parents could affect these entities.