Daily Archives: March 17, 2012

Moody’s reviews Bolivian private bank’s risk ratings

El Deber reports on Moody’s rating for Bolivian banks:

The Moody’s agency brought in review risk premiums awarded to six entities operating in the country: Banco Mercantil Santa Cruz, Banco Solidario, Banco de Crédito de Bolivia, Banco Bisa, Banco Nacional de Bolivia and Banco Los Andes Procredit, in addition to the Bisa Leasing group. This, according to the company, so that the rating of financial institutions and their values are not above the country rating.

Moody’s justified movements before recently it advised on a global scale of linkages between financial institutions and the credit risk of sovereign debt of countries.

The Agency explained that the revisions focus on the degree of correlation between the quality of sovereign credit and issuing certain profiles, whose skills are today above those which receive their respective countries.

On the subject, from the center of public studies, Populi explained that this kind of analysis carried out by the firm Moody’s is common and what is sought is to see ratings of the banks aren’t on top of the country to which they belong.

According to this institution, the control is due to the critical financial situation of some countries of the European Union, which the rating agency wants to have a more accurate x-ray on what is happening in Bolivia and in the region, to avoid a situation similar to that suffered in the United States and which affects currently Ireland, Spain, Italy and Greece.

On the subject, Patricio Garrett, Vice President of international relations and development of the National Bank of Bolivia (BNB), argued that Moody’s has changed the methodology of assessment, stating that the rating of an issuer (a bank in this case) that is above his country’s sovereign debt rating it will be subject to review for a possible cut to the level of sovereign risk (risk of the country). I.e. that the issuers whose qualifications are today above which receive their respective Nations will be subject to modifications.

“This determination has to do directly with the performance of the banks, so it does not affect the relationship between banks and their clients”, said Garrett.

In turn, Sergio Unzueta, Vice President of finance and international affairs of the Banco Mercantil Santa Cruz, argued that what is doing the rating is to implement a new system of measurement that previously did not and now takes into account the risk of country where the Bank operates.

“I think it is a good measure, because somehow it is trying to avoid ratings that are not consistent with the reality of the country, but in our case because of our ability are two degrees above Bolivia”, Unzueta said.

Similar approach was the Association of private banks of Bolivia (Asoban).

We sought to take the opinion of the other banks, but they announced that they will now [Friday, March 12, 2012] provide a response to this issue.

-Profile. Moody’s Corporation is the parent company of Moody’s Investors Service, an agency of rating that performs international financial research and analysis of commercial and Government entities. The company also ranks the solvency of borrowers using a standardized ratings scale.The company has a share of 40% in the world market of credit rating, as well as its main rival, Standard & Poor’s. Moody’s was founded in 1909 by John Moody. The main institutional owners of Moody’s include the company of Warren Buffett Berkshire Hathaway and Davis Selected Advisers.

[for full Spanish article, please use the link below]

http://www.eldeber.com.bo/nota.php?id=120315230652

I believe Moody’s rationale and Bolivian bankers understanding of the issue makes sense. However, we should not forget that if our beloved country wouldn’t be as chaotic and anarchist as it is becoming over the last six years, our banking system would not have had to refrain themselves. In other words, our businesses like it is the case in this post, have to endure and cope with current government’s failures. We as Bolivia are being pulled down instead of being pulled up, governments’ role is just that, help their citizens by enforcing laws, providing sufficient public safety, investing our taxes appropriately and allowing us as entrepreneurs to make our living. That is more than any government to do, instead of digressing without any sense.