Moody's announces bank rating actions for Arab Bank Australia resulting from implementation of JDA and BFSR methodologies.

May, 2007

Moody's Investors Service has today (4^th May 2007) published the rating results for Arab Bank Australia as part of the application of its refined joint default analysis (JDA) and updated bank financial strength rating (BFSR) methodologies for banks in Australia.

Moody's BFSRs evaluate the stand-alone or intrinsic financial strength of banks without reference to external support factors. BFSRs are the starting point of Moody's bank credit analysis, and are an important determinant of Moody's bank deposit and debt ratings.

Moody's then uses its JDA methodology to incorporate the potential for external support into a bank's local currency deposit rating. The potential for external support can reduce the riskiness of a bank's deposit and debt obligations; however, such support is often uncertain. Moody's uses conservative support assumptions and a limited number of support levels to ensure that sufficient weight is given to a bank's intrinsic financial strength in its bank deposit and debt ratings.

Moody's uses deposit ratings to determine bank debt ratings based on its notching guidelines for bank securities. Ratings for foreign currency obligations are determined after considering Moody's country ceilings for foreign currency ratings.

Moody's assesses systemic support levels for Australian banks using its high country support guideline. This guideline takes into consideration the historic evidence of support for banks, as well as the size, strength, and degree of fragmentation of the banking system. The ratings of Arab Bank Australia were raised by one notch.

The specific ratings changes for Arab Bank Australia are as follows:

• BSFR has been upgraded to D+ from D.
• Foreign Currency Deposit Ratings have been upgraded to A3/Prime-1 from Baa1/Prime-2.
• Local Currency Deposit Ratings of A3/Prime-1 have been assigned.
• All ratings are assigned stable outlooks.

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