Moody’s downgrades seven Mongolia banks

Moody’s Investors Service said it downgraded the local-currency long-term deposit ratings of seven Mongolian banks to Caa1 from B3 following the downgrade of Mongolia’s sovereign rating to Caa1 from B3 with a stable outlook.

The seven banks that were downgraded include Bogd Bank LLC; Capital Bank LLC; Golomt Bank LLC; Khan Bank LLC; State Bank LLC; Trade and Development Bank of Mongolia LLC; and XacBank LLC.

Moody’s also said it downgraded the foreign-currency deposit ratings of the seven banks to Caa2 from Caa1 as it revised Mongolia’s long-term foreign-currency deposit ceiling to Caa2 from Caa1.

The outlooks on all of the banks are stable.

The downgrades of the banks’ ratings reflect the high correlation between the creditworthiness of the Mongolian banking system and that of the sovereign, Moody’s explained.

There is a high level of dependency between the creditworthiness of rated Mongolian banks and the sovereign due to the high extent to which the banks’ businesses depend on macroeconomic and financial conditions in Mongolia and their significant direct and indirect exposures to domestic sovereign debt relative to their capital bases, the agency said.

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