The Caribbean Development Bank’s (CDB) once unsullied “AAA” rating has been hit by another downgrade.
Three weeks after rating agency Moody’s Investment Services dropped the Barbadian-headquartered bank’s ranking from “Aaa” to “Aa1”, yesterday Standard & Poor’s followed suit, cutting the CDB’s rating from “AAA” to “AA+”.
However, S&P maintained the institution’s “A-1+” short-term issuer credit rating and regarded the CDB’s outlook as “stable”.
S&P said it downgraded the CDB because the bank’s risk management had “weakened” and it was not in line with a triple-A ranking assigned to other multilateral lending institutions given the CDB’s size and the regional economic weakness.
The New York-based rating agency said CDB had “failed to comply with one of its internal liquidity policy guidelines, and borrower concentration remains high”.
Commenting on the stable outlook it assigned to the regional bank, S&P said it reflected the rating agency’s expectation that the “financial profile will remain stable, with new capital subscriptions offsetting lower profitability seen this past year and that it will remain so in the near future”.
It added: “We expect the continuation of preferred creditor treatment and the bank’s prominent position as a lender in its borrowing member countries.”
However, S&P suggested that if the CDB strengthened its risk management policies it could benefit from an upgrade.
On the other hand, S&P warned the bank that “deterioration of the financial profile would lead to a downgrade”.
“Additionally, the ratings could be affected – up or down – by our new criteria for multilateral lending institutions, which we expect to adopt later this year,” the rating agency disclosed.
Efforts yesterday to reach CDB president Dr Warren Smith for a comment were unsuccessful but following last month’s Moody’s downgrade he expressed the bank’s “disappointment at the decision”, but accepted that, given the current climate of uncertainty, its risk management practices needed to be strengthened.
“To that end, we are undertaking an in-depth examination of our risk management framework and we will implement appropriate recommendations . . . .,” he noted then.
