Moody’s downgrading seen as having ‘no major negative impact’ on banking sector


Dr. Nandalal Weerasinghe

By Hiran H.Senewiratne

Moody’s Investors Service downgrading of three local commercial banks will not be having a major negative impact on the banking and financial sector in the country, Central Bank Deputy Governor Dr Nandalal Weerasinghe said.

Moody's revised their rating outlooks to negative from stable for three banks, namely, People's Bank, Hatton National Bank and Sampath Bank.

"As the country's sovereign rating is downgraded it is obvious other sectors are also subjected to downgrading by them. This does not mean that Moody's have downgraded the entire banking and financial sector per se, Dr Weerasinghe told The Island Financial Review.

He also said that those three banks have obtained ratings from Moody's Investors Service only. "Based on their rating methods they have presented their rating to the public. But it will not impact on the sector as a whole, the Deputy Governor said.

Vice president Frontier Research Travis Gomes told The Island Financial Review that Moody's revision outlook to negative from the stable level actually will not affect the entire banking sector but it is a clear signal that the government is seen as not fully implementing the IMF loan conditions.

He said that the IMF has imposed certain conditions,like tax reforms,to bring the budget deficit to manageable levels and many other reforms. "But Moody's doubt that the government will fully implement the those reforms, Gomes said.

The Baseline Credit Assessments (BCAs) and Adjusted BCAs of the three banks were affirmed at b1. The counterparty risk assessments (CRAs) of the three banks were affirmed at Ba3(cr)/NP(cr).

The credit ratings on the three banks were affirmed and their outlooks changed to negative because Moody's affirmed Sri Lanka's B1 sovereign rating and changed its outlook to negative from stable on June 20, 2016.

animated gif
Processing Request
Please Wait...