DHAKA, Nov. 21 (Xinhua) -- Moody's Ratings (Moody's) has downgraded Bangladesh's banking sector to "very weak" from "weak," citing worsening client confidence, limited transparency and inadequate financial safeguards over the past year.
According to Moody's latest positions on Bangladesh's banking sector following a recent review, the risks include increased financial instability, poorer growth prospects and higher default risks, all of which could negatively impact the creditworthiness and profitability of banks.
"We anticipate that the central bank's initiative to enhance asset quality recognition will cause a near-term surge in non-performing loans (NPLs) but contribute to greater systemic stability," it said.
The ratings agency, however, said despite the increased risks to asset quality, the funding and liquidity of most rated banks have remained largely stable.
Earlier this week, Moody's downgraded Bangladesh's sovereign rating to B2 from B1 and said the outlook has been changed to "negative" from "stable." ■