Bangladesh’s credit risks extremely high: S&P
The global rating finds Bangladesh's industry risk trend “stable”
Credit risk in Bangladesh remains extremely high, with weak foreclosure laws and underwriting standards, and weak governance at some banks, says S&P Global Ratings.
The US-based credit rating agency, however, has spoken highly of Bangladesh's growth prospects and economic recovery, and expected the credit growth to pick up with the economy gradually returning to normalcy.
In its "Banking Industry Country Risk Assessment: Bangladesh" released from Singapore yesterday, S&P has also found Bangladesh's economic and industry risk trends 'stable.'
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While Bangladesh is aiming to implement international regulatory standards, weak asset quality and capitalization of some banks reflect gaps in monitoring and in the system's ability to address problems early, the global rating agency observed.
"In our view, Bangladesh's banking system has overcapacity and market distortions," S&P said, adding that a supportive core customer deposit base and low reliance on external funding temper these weaknesses.
High stressed assets along with thin capital buffers of some banks continue to pose additional risks, it pointed out, expecting a "strong deposit-driven system-wide funding" to remain a relative strength.
"In our opinion, Bangladesh's low-income economy, heavy development needs, and fiscal constraints limit its economic resilience," it says.
S&P, however, sees Bangladesh's growth prospects "healthy" and economic imbalances "relatively low," with credit growing in line with nominal GDP and benign current account positions.
"Bangladesh's economic risk trend is stable. The country's economic recovery will continue to build over the next one to two years following a real expansion of 5.5% in the year ended June 2021," it said, citing the severe COVID-19 outbreak as a near-term hindrance to economic activity.
It also found Bangladesh's industry risk trend "stable," although reforms took a step back in light of the pandemic, similar to many other countries.
However, recurring waves of Covid-19 infections remain a risk as vaccination rate in the country currently remains low, it pointed out.
