S&P downgrades CDB
Caribbean Development Bank rocked by second credit rating downgrade in less than a month.
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.