(The following statement was released by the rating agency)
NEW YORK, September 14 (Fitch) Fitch Ratings has affirmed the
Bank for Economic Integration's (CABEI) Long-Term Foreign
Default Rating (IDR) at 'A'. The Rating Outlook has been revised
from Stable. The National Ratings in several markets are
affirmed at 'AAA' on
their respective national scales, with a Stable Outlook, and the
on CABEI's senior unsecured bonds are also affirmed at 'A',
The revision of the Outlook on the Long-term IDR to Positive
improvement in CABEI's overall risk profile, a trend that Fitch
continue over the medium term.
KEY RATING DRIVERS
The affirmation and Positive Outlook reflect the following key
CABEI's IDR is fully driven by its intrinsic credit quality,
most notably its
high level of solvency (assessed at 'aa-') and its strong
liquidity (assessed at
'aaa'). The high-risk business environment in which this
development bank (MDB) operates leads to a two-notch lower
rating from the
solvency assessment of 'aa-', resulting in an intrinsic rating
In addition to reduced exposure to the private sector, the near
impaired loans, the maintenance of solid reserve coverage and a
reduction in loan concentration, CABEI's liquidity profile
includes a higher
proportion of 'AAA'/'AA' rated investments. Fitch also expects
diversification and lower average loan book risk over the rating
most of CABEI's loan growth will be directed toward countries
In Fitch's view, the recent amendments to CABEI's Constitutive
effective June 2016, facilitate risk diversification and sustain
as well as strengthen CABEI's preferred creditor status and
These amendments will allow CABEI to widen its scope outside of
member countries (Guatemala, El Salvador, Honduras, Nicaragua
and Costa Rica) as
long as the projects are consistent with its purpose and
The MDB's solvency assessment is driven by its strong and stable
position which compensates for the higher risk of its loan book.
excellent and stable capital ratio is underpinned by
policies, moderate exposure growth, and sustained capital
The operating environment weighs on the rating, as the MDB
operates in a
high-risk business environment. The focus of CABEI's financing
middle-income founding-member countries and the Dominican
exhibit some degree of political instability and generally
indicators as reported by the World Bank, drive this assessment.
the MDB's headquarters are located in Honduras, which falls into
quartiles for half of the World Bank governance indicators.
CABEI's IDR does not incorporate credit uplift for extraordinary
shareholders due to the key shareholders' average rating of 'BB'
at end-2015 and
the lack of sufficient callable capital to provide full coverage
of net debt.
As CABEI's LTFC IDR is materially above the sovereign ratings of
Mexico, Panama, Costa Rica, Honduras and Dominican Republic, the
MDB is rated
'AAA' on the respective national rating scales.
The Positive Outlook reflects Fitch's assessment of the upside
potential of the
rating. The following risk factors, individually or
collectively, could trigger
a positive rating action:
--A marked improvement in the bank's risk exposure, reflected by
an increase of
the loan portfolio's average rating while maintaining good asset
metrics. This increase would be driven by growth in countries
other than the
founding member countries, rated above the loan portfolio's
rating of 'B+'.
A downgrade of the IDR is unlikely given the Positive Outlook.
could individually or collectively result in a return to a
--A material increase in business environment risk driven by a
increase in the bank's exposure to countries with a higher risk
--A marked deterioration in the average rating of the loan
Fitch assumes that member countries, even if experiencing severe
will continue to honor CABEI's preferred-creditor status and
private-sector borrowers from any measures that may affect the
convertibility of their debt service payments.
Fitch has affirmed CABEI's ratings as follows:
--Long-Term IDR at 'A'; Outlook revised to Positive from Stable;
--Short-Term IDR at 'F1';
--Senior unsecured debt at 'A'.
--Long-term national rating in El Salvador at 'AAA(slv)';
--Short-term national rating in El Salvador at 'F1+(slv)';
--Senior unsecured long-term debt in El Salvador at 'AAA(slv)';
--Long-term national rating in Honduras at 'AAA(hnd)'; Outlook
--Short-term national rating in Honduras at 'F1+(hnd)';
--Long-term national rating in Costa Rica at 'AAA(cri)'; Outlook
--Short-term National Rating in Costa Rica at 'F1+(cri)';
--Senior unsecured long-term debt in Costa Rica at 'AAA(cri)';
--Senior unsecured short-term debt in Costa Rica at 'F1+(cri)';
--Senior unsecured long-term debt in Mexico at 'AAA(mex)';
--Senior unsecured long-term debt in Panama at 'AAA(pan)';
--Senior unsecured long-term debt in Thailand at 'AAA(tha)'.
The following rating was unaffected:
--Long-term National Rating in Dominican Republic at 'AAA(dom)';
Fitch Ratings, Inc.
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Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908
Additional information is available on www.fitchratings.com
National Scale Ratings Criteria (pub. 30 Oct 2013)
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