Fitch Ratings reports that the overall bias of its bank ratings is positive for the third quarter with just under 12% of all ratings having a positive outlook.

This is the highest the positive outlook figure has been since the inception of this data in the first quarter of 2005. More than 81% of banks globally have a stable outlook, with only 3% having a negative outlook.

By far the most significant driver of bank rating action in the third quarter was the revision by Fitch’s sovereign group of its Country Ceilings for 40 countries in August. The upward revision of the Country Ceilings reflects greater liberalization of capital and exchange controls in many “emerging market” economies, the strengthening of monetary and exchange rate regimes and the deepening integration of emerging markets in the global economy, the rating agency said.

“However the number of banks on negative watch also increased over the last quarter, due to an up-tick in event risk, which although primarily M&A related in the developed markets, in emerging markets had a significant political event risk component, namely the military coup in Thailand and the Lebanon/Israel conflict,” Fitch warned.

“This is a timely reminder that the relatively close alignment of banking and sovereign risk in emerging markets can have negative as well as positive implications,” said Gerry Rawcliffe, managing director in Fitch’s Financial Institutions Group in London.

Overall the developed markets continued to show a high degree of rating stability, although the positive outlook has become progressively stronger over the last two quarters, Fitch noted. This has been the case in all three of the developed regions, in particular developed Americas and Asia, driven by US and Japan respectively, it added.

In the U.S., the companies with positive outlooks cover a diverse range of banks from some of the very largest to far smaller institutions, and across a range of operating profiles from investment banking to corporate credit unions. “Despite the variety of US institutions represented, the positive outlooks are related to company specific events and trends and should be viewed as an indication of positive ratings momentum across the wide range of US financial institutions that Fitch rates,” it says.

The emerging markets continue to show a greater level of rating volatility, Fitch adds, with the overall level of stable outlooks falling back to 75% in Q3, having trended upwards since Q4 2005. The increased potential for volatility remains largely on the upside with positive outlooks at 14% and positive watches at 3.7%, it says.

Aside from Thailand, the emerging markets main trouble spot remains Venezuela with eight banks on negative outlook. In emerging Asia, the other most notable development was the addition to the list of positive outlooks of five Chinese banks, two of which are policy banks and the other three being amongst the country’s largest commercial banks, it says. Emerging Europe has become more volatile, Fitch adds. Although the region still enjoys a positive outlook, driven by Russia and assorted other countries.