S&P drops Latvia

Standard & Poor's said it lowered its long-term foreign and local currency sovereign credit ratings on the Republic of Latvia to BBB- from BBB, due to the increased risk facing Latvian banks of a weakening deposit base.

The short-term ratings of A-3 were affirmed, the agency noted.

At the same time, S&P said it also lowered its transfer & convertibility assessment on Latvia to A- from A while the long- and short-term ratings have been placed on Creditwatch with negative implications.

High external indebtedness and substantial, but declining, current account financing needs remain the key constraints on the ratings on Latvia, the agency said, adding that the flow of external financing depends on the willingness and ability of foreign parent banks to roll over intra-bank lending, as well as the stability of non-resident deposits in domestic banks.

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