BRIDGETOWN,
Barbados, Thursday June 14, 2012 – Less than a month after Moody’s downgraded
the credit ratings for the Caribbean Development Bank (CDB) by one notch from
Aaa to Aa1, Standard & Poor’s has lowered the financial institution ’s
prized AAA rating by one notch to AA+.
However,
the downgrade which came on Tuesday (June 12) left the long-term outlook at
stable.
According
to a statement by Standard & Poor’s, the downgrade was due to weakening in
the CDB’s risk management, “The downgrade reflects our view that CDB’s risk
management is not commensurate with other ‘AAA’ rated multilateral lending
institutions, particularly given its size and regional economic weakness,” the
Wall Street-based credit ratings agency cautioned.
The
ratings agency also accused the CDB of having failed to comply with one of its
internal liquidity policy guidelines, and borrower concentration remains high.
“The
stable outlook reflects our expectation that despite weaknesses in the risk
management framework, the bank’s financial position will remain in line with
its rated peers and that the very strong shareholder support will persist,”
Standard & Poor’s said.
Borrower
concentration has historically been high for CDB, and stresses have emerged
because of the prolonged economic weakness in the Caribbean, S&P noted.
Last
month, following the downgrade by Moody’s, new chair of the CDB Dr Kenny
Anthony, the Prime Minister of St Lucia, charged the bank’s management to make
every effort to stabilise and prevent further erosion of its credit rating, and
to strive to reverse the negative outlook and return the bank’s credit to a
higher rating threshold,” Anthony said.
The
CDB has experienced recently a change of senior management and a number of
senior positions are in the process of being filled. The bank is also reviewing
its risk management and capital adequacy frameworks, which are expected to be
completed by the end of 2012.
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