Moody's may lower Bancolombia

Moody's Investors Service said it will maintain its review for possible downgrade on Bancolombia's D+ bank financial strength rating, responding to legal actions announced Jan. 4 against two of the bank's key executives. Moody's also said it affirmed Bancolombia's long- and short-term foreign-currency deposit ratings of Ba3 and not prime, respectively.

The bank's financial strength rating was first placed under review for possible downgrade Dec. 28 following an announcement that it had signed an agreement to acquire a controlling interest in Banco Agricola, SA. The review reflected Moody's concerns regarding the acquisition's potentially negative effect on the parent's capitalization.

More recently, legal allegations of fraud and misconduct have been made against two of Bancolombia's top executives. The ongoing legal action appears to have had limited negative effects so far on the bank's financial standing, the agency said. Therefore, Moody's said no further rating action is warranted at this time. The agency added, however, that it will consider a rating action if the legal actions deteriorate the bank's financial strength, operations or liquidity.

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