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 James McCormack, Head of Asia Sovereigns, noted that the rating would be at risk particularly if economic growth were to slow significantly, capital outflows were to accelerate, or economic policymaking is further disrupted.

 On Thai banks, Vincent Milton, senior director of Financial Institutions and Head of Fitch's Thai Office, said reporting one of the region's strongest results, Thai banks' performance improved substantially in the first half following two years of weak profitability. While overall results for the year should still be favourable, Thai banks are likely to face renewed asset quality and margin pressures due to higher funding costs and declining loan growth in the second half.  

 "Also, if political troubles continue or the economy slows sharply, this could impact the banks' rating Outlooks in 2009," he noted.

 McCormack was in Bangkok on Wednesday, when Fitch Ratings (Thailand) Ltd hosts its annual conference in Bangkok, focusing on the outlook for the domestic economy and banks amid political upheaval. The conference also focused on the global credit crunch and its implications for Thailand and the region's economies and banks.

 At the conference, McCormack indicates that the short-term outlook for emerging Asian economies is deteriorating based on synchronised GDP growth downturns in the US, Europe and Japan.

 "Emerging Asia is not immune from the fallout, and there is already evidence of weakness in the region's largest economies, China and India," noted   McCormack. He also highlighted concerns regarding Asian inflation rates, many of which continue to move higher. "Real interest rates remain low in most countries, suggesting monetary policy is still broadly accommodative," added McCormack.

 Commenting on the spread of the financial crisis beyond US subprime, David Marshall, Head of Asia Pacific Financial Institutions said "The failure of Northern Rock in the UK was an example of a bank pursuing a strategy based on aggressive asset growth without putting in place reliable sources of funding and paying the price when the sources of liquidity it expected to be available proved not to be."

 On Bear Stearns that was brought down by a loss of liquidity, Marshall said: "The support extended to Bear Stearns by the New York Federal Reserve was also a new development and highlighted the fact that even broker dealers can be 'too big to fail' - not because of their importance as deposit-takers but as counterparties in swap transactions." On Fannie Mae and Freddie Mac, Marshall noted that, had the US government not provided support, a default by either of these entities would have inflicted losses on investors around the world, including many Asian commercial and central banks.