Moody’s lowers three Bahraini banks

Moody's Investors Service said it concluded its review for downgrade on the ratings of four Bahraini banks initiated on March 7 and downgraded the long-term local currency ratings of BBK BSC, National Bank of Bahrain BSC and Bahrain Development Bank BSC to Ba2 from Ba1.

All ratings carry a negative outlook.

The actions on the Bahraini banks reflect the weakening financial strength of the sovereign, as indicated by Moody's downgrade of Bahrain's government issuer rating to Ba2 negative from Ba1 ratings under review, on May 14, which concluded the review for downgrade of the sovereign rating that was initiated on March 4. The sovereign action reflects the ongoing negative impact of lower oil prices on Bahrain's fiscal position and economic strength.

Moody's said its decision to downgrade BBK's and National Bank of Bahrain's ratings reflects the close linkage of the banks' credit profile to the weakening fiscal position of the government, primarily through their high and increasing direct holdings of Bahraini government securities.

The decision to downgrade Bahrain Development Bank's ratings primarily reflects the reduced fiscal capacity of the government to provide support to the bank in times of stress, if needed.

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