SINGAPORE (S&P Global Ratings) Feb. 27--S&P Global Ratings placed
Bangladesh in group '8' under its Banking Industry Country Risk Assessment
(BICRA) in a report, titled "Banking Industry Country Risk Assessment:
Bangladesh," that it published Monday.
“Our bank criteria use our BICRA economic risk and industry risk scores to
determine a bank's anchor, the starting point in assigning an issuer credit
rating. The anchor for banks operating only in Bangladesh is 'bb-'. “
“We regard Bangladesh's economic risk trend as stable. Its growth prospects
remain steady, supported by good performance in the export-focused
manufacturing sector. We expect that some banks in Bangladesh will continue to
face asset quality challenges, with sizable reported nonperforming loans, in
addition to a high level of restructured loans,” S&P Global Ratings said.
Bangladesh's industry risk trend is also stable. We expect the central bank to
continue to address the banking industry's legacy stressed assets and gaps in
governance. But the execution of these reforms will likely be gradual, as will
be the benefits. We also expect Bangladesh's systemwide funding to remain a
relative strength.
"In our opinion, Bangladesh's low-income economy, heavy development needs, and
fiscal constraints limit its economic resilience. We consider that banks
operating in Bangladesh face substantial credit risks, with weak foreclosure
laws and underwriting standards, weak governance at some banks, and client
concentration leading to sizable stressed assets. That said, Bangladesh has
healthy growth prospects and moderate economic imbalances with credit growing
in line with nominal GDP, moderate inflation, and a satisfactory current
account position," the S & P said.
Bangladesh is in the process of implementing international regulatory
standards. However, we believe supervision has gaps and imposes limited market
discipline. Also, the banking system has overcapacity and market distortions,
in our view. A supportive core customer deposit base and low reliance on
external funding temper these weaknesses.
-rmc//