Moody’s Investors Service says that based on a sample of 43 policy banks rated by Moody’s in G20 countries, sovereigns face limited contingent liability risks related to potential financial support needed to support the banks’ debt obligations.
Some governments incur fiscal costs to support the policy banks’ operations, which are typically taken into account in Moody’s assessment of the sovereigns’ fiscal strength. At the same time, contingent liability risks related to policy banks have been found to be limited for the G20 countries included in the sample.
On the issue of contingent liability risks, Moody’s says that such risks posed by G20 policy banks on their respective sovereigns are limited because: where policy banks are large, the banks tend to be financially robust, or where the policy banks’ asset quality and financial strength is weaker, as in Russia, South Africa and Indonesia, the banks are relatively small.
