WHO watches the watchers? Rating agency Moody's has been keeping a beady eye on Hong Kong for some time, and it doesn't like what it sees.
It doesn't like the peg, it doesn't like 1997, it doesn't like the property bubble, it doesn't like China fever - and now it doesn't like our banks.
This is what Moody's tells us: 'There are many challenges ahead, including tighter margins, more competition, slower loan growth and asset quality erosion.' The general summary is this: 'The cycle of Hong Kong's banking has obviously peaked and has started its journey down.' Call Lai See a boring old traditionalist, but healthy earnings growth, reduced exposure to bad loans and consequent reductions in bad-debt provisions, increased net profits and generally healthy balance sheets in relatively adverse circumstances indicate the inherent strength of our banking sector.
The proof of the pudding has been in the latest results.
So here is Lai See's proposal. We are downgrading Moody's.
Previously we would have favoured a Aaa rating for Moody's, given its understandable and well expressed fears over the property market bubble and the ever-present issue of 1997. The fears were justified and the ratings accurate enough.
