Fitch Ratings says in a quarterly report that at the end of Q107, 16.3% of global bank ratings were assigned Positive Outlooks, the highest level recorded since the report began. This increase was driven by emerging markets where a number of banks benefited from changes to their sovereign Outlooks.

The emerging markets' Positive Outlooks increased to almost 23% overall from around 16% in Q406. The majority of global Positive Outlooks are in emerging markets even though fewer emerging market banks are rated. Within each region - emerging Asia, emerging Americas, Middle East and Africa - around a quarter of the banks' rating Outlooks are Positive. In emerging Asia, the Positive Outlooks are dominated by Indonesia following a similar change to the Indonesian sovereign.

By contrast, the number of Positive Outlooks remained stable in the developed markets at 11.5%. In the developed Americas and Europe, several banks with Positive Outlook at end-Q406 were upgraded. Several of these upgrades were high- profile US institutions, which Fitch believes will benefit from their diversified franchises. In Japan, Positive Outlooks - some of them maintained despite negative events - continued to reflect the improved robustness of major domestic banks.

Unlike the last two quarters of 2006, in Q107, a stronger positive bias in rating Outlooks was matched by a stronger positive bias in rating actions. The ratio of positive actions to negative actions - at 12.14:1 - was the second highest since the commencement of the series due to a large number of Positive Outlook changes. In addition, upgrades were, in contrast to the larger number of Positive Outlooks in emerging markets historically, mainly in developed markets. Fitch believes that this could be explained by the greater dependence of emerging market bank ratings on sovereign ratings. The total number of rating actions in Q107 was 92, split equally between developed and emerging markets and upgrades included institutions in Japan, as well as the US.