Top banks from Singapore and China are set to benefit from Moody's Investors Service's ratings downgrade of 15 international banks last Friday, with the regional lenders likely to gain market share as the activities of their rivals are curtailed, analysts told MediaCorp yesterday.

Moody's move has provided banks such as Singapore's DBS, Oversea-Chinese Banking Corp and United Overseas Bank with a major advantage over their international peers: They are now able to borrow at cheaper rates by issuing long term debt and in the highly competitive landscape, customers may increasingly turn to them for their funding needs.

All three Singapore banks have a better Moody's rating of Aa1 for their long-term credit compared to the international trio of HSBC, Royal Bank of Canada and JPMorgan, which are now rated Aa3.

Meanwhile, China's top three lenders, Industrial Commercial Bank of China, Bank of China and China Construction Bank are rated A1 for their long term credit, putting them on par with Credit Suisse.

Mr Kenneth Ng, Head of Research at CIMB Securities, said: "Banks require a credit rating to get funding faster both from the capital market as well as from each other. So, when you have a ratings downgrade ... the banks that got downgraded in the western world will find it more expensive to get funding. They will be at a disadvantage to Asian banks, which are healthy and have not received downgrades."

But some market watchers pointed out that the big Asian banks already have a strong deposit base and are unlikely to tap extra funding despite the advantage over their international peers. And Asian banks are not expected to be immune from the debt debacle in the euro zone, which may eventually affect their business if it cannot be contained.

TODAY