Moody’s Investors Service has placed seven Bangladeshi banks’ long-term ratings and assessments on review for downgrade following an announcement that the rating agency has placed the Dhaka government’s long-term ratings on review for downgrade.
The US-based agency released its ratings on its website on Monday, reports Xinhua news agency.
It has also downgraded the Social Islami Bank Limited’s (SIBL) long-term foreign currency deposit ratings to B3 from B2 and the bank’s Baseline Credit Assessment (BCA) to caa1 from b3.
The decision to place the ratings and assessments of seven Bangladeshi banks on review for downgrade is driven by Moody’s placement of Bangladesh’s Ba3 sovereign rating on review for downgrade on December 9, it mentioned.
Bangladesh’s sovereign credit strength is a key input in Moody’s assessments of bank ratings because the country’s credit strength affects the government’s capacity to provide support to the banks in times of stress.
If Moody’s were to downgrade Bangladesh’s sovereign rating, it will likely result in lower long-term ratings for the banks.
The rating action also considers the deterioration in the country’s foreign exchange reserves and central bank’s measures to limit foreign currency outflows, which have tightened foreign currency liquidity in the banking system.
“During the rating review, Moody’s will assess if the efforts instituted by the central bank and individual banks to improve their foreign currency liquidity, such as limiting the opening of new letters of credit and efforts to attract remittances, will help to improve the banks’ foreign-currency liquidity to support their obligations,” Moody’s said in its ratings.