It said the CreditWatch placement reflected a one-in-two chance that the rating house would lower its long-term rating on FEI to 'B-' in the next three months.

“Contrary to our previous expectations, the FEI group has been unable to raise its risk-adjusted capital (RAC) ratio (based on S&P Global Ratings' bank capital methodology) above 15%," S&P said.

“We note that the FEI group has successfully raised its RAC ratio since March 2018 by reducing its property development loan and adding capital.

“However, the positive impact of these measures on the consolidated group's RAC ratio has been offset by strong loan growth and material deductions in capital due to goodwill and other intangible assets.

“Furthermore, we believe that recent developments on the restatement of financial accounts (to disclose related-party exposures, with no restatements in profit and loss statement and balance sheet) and retrospective breaches of financial covenants in the finance company's debenture program could pose risks for FEI's ability to raise capital as well as roll over debentures.

“We are likely to lower our long-term rating on FEI to 'B-' within the next three months if we form the view that the FEI group is unlikely to be able to raise its RAC ratio sustainably above 15% under our RAC methodology. We would likely affirm our ratings on FEI if we gained confidence that the FEI group is likely to reach a RAC ratio of greater than 15% within a very short period and then maintain it at that level on a sustainable basis, and there are no other significant adverse developments.”