Moody's downgrades Costa Rica banks

Moody's Investors Service said it downgraded the long-term local-currency deposit ratings of both Banco Nacional de Costa Rica and Banco de Costa Rica to B1 from Ba2.

The agency also said it downgraded Banco Nacional's foreign-currency deposit ratings to B2 from Ba3, along with its baseline credit assessment and adjusted baseline credit assessment to B1 from Ba2.

The agency also downgraded Banco de Costa Rica's baseline credit assessment and adjusted baseline credit assessment to B2 from B1, along with its long-term foreign-currency senior unsecured debt rating to B1 from Ba2.

The outlook also was changed to negative.

Moody's also said it downgraded the deposit rating and adjusted baseline credit assessment of Banco Internacional de Costa Rica, SA (Bicsa) to B2 from B1 and to B2 from B1, respectively.

The outlook on Bicsa was changed to stable and its B2 baseline credit assessment was affirmed.

These actions conclude reviews for downgrade that began in October, the agency said.

The downgrades consider the deterioration of Costa Rica's operating environment for banks coupled with the weaker capacity of the government of Costa Rica to provide them with financial support in an event of stress, as reflected in the downgrade of Costa Rica's sovereign rating, Moody's said.

The downgrades also capture the significant funding challenges emerging for the country as rising debt, deficits and interest costs lead to rapidly rising borrowing requirements, the agency said.

The negative outlook considers implementation risks associated with the government's fiscal consolidation efforts, the agency said.

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