Moody’s places Social Islami Bank on review for downgrade
Signage is seen outside the Moody’s Corporation headquarters in Manhattan, New York, US, 12 November 2021. Photo: Reuters
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Signage is seen outside the Moody’s Corporation headquarters in Manhattan, New York, US, 12 November 2021. Photo: Reuters
The international rating agency Moody’s has placed the long-term ratings and assessments of Social Islami Bank PLC (SIBP) on review for downgrade, including the bank’s CAA1 long-term foreign and local currency bank deposit ratings, CAA1 long-term foreign and local currency issuer ratings.
“We would downgrade the rating if the bank’s credit profile weakens due to, among other things, lower liquidity, higher asset risk, or funding pressure. A worsening of government support for the bank would also result in a rating downgrade,” reads a Rating Action of the agency published on Thursday.
Moody’s said it has also downgraded the bank’s baseline credit assessment (BCA) and adjusted the BCA to CAA3 from CAA2, the counterparty risk rating (CRR) to CAA1 from B3, and the long-term counterparty risk (CR) assessment to Caa1 (CR) from B3 (CR), and placed them under review for a downgrade.
“We have placed the ratings under review for downgrade due to our concerns over SIBP’s viability amid weakened funding and liquidity, as well as increased asset risks,” said the rating agency.
These risks have heightened due to recent social unrests in Bangladesh, which highlight significant governance issues in the country’s Islamic banks, including SIBP, it added.
The rating agency mentioned that it has downgraded SIBP’s BCA and adjusted BCA to CAA3 from CAA2 due to increased downside risks to the bank’s already weak liquidity, as heightened corporate governance concerns on Islamic banks following the change in government may weaken confidence.
It has also downgraded the bank’s long-term CRR and CR assessment to Caa1 from B3 and CAA1(CR) from B3(CR), aligning those ratings with the bank’s CAA1 deposit ratings.
“This adjustment stems from our expectation that, in case of SIBP’s resolution, Bangladeshi authorities will not distinguish between the bank’s operational liabilities and its obligations to depositors and other creditors,” it added.
The agency said, given the review for a downgrade, the ratings are unlikely to be upgraded.
“We could revise the outlook back to stable if the bank maintains its solvency, including access to the central bank’s emergency liquidity facility, and addresses its financial and governance risks,” it added.
