Fitch withdraws ratings for Belarusbank, Belinvestbank in light of sanctions

US credit rating agency Fitch has withdrawn the ratings for Belarusian banks Belarusbank (BBK) and Belinvestbank (BIB) on the back of the sanctions imposed on the bank sector of the Lukashenka regime.

Belarusbank headquarters. Мinsk, 16 March 2021. Photo: ТК / Belsat

According to the agency, it will no longer provide ratings or analytical coverage for the two banks, but ‘should the sanctions be removed’, it will review its decision.

Shortly before, Fitch affirmed Belarusbank’s and Belinvestbank’s Long-Term Issuer Default Ratings (IDR) at ‘B’; the outlooks being ‘negative’.

“The affirmation of BBK’s and BIB’s IDRs, SRs [support ratings] and the SRFs [support rating floors] reflects Fitch’s expectation that the Belarusian authorities will continue to provide support to these banks, in case of need. In Fitch’s view, the authorities have a high propensity to provide support to both banks, given majority state ownership, BBK’s exceptional systemic importance and policy role, and the record of support to the banks to date,” the statement reads.

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The representatives of the agency believe the sanctions’ impact on these banks’ funding profiles should be ‘manageable’ in the near term; both banks’ capital market activity in the EU has been limited to date and EU funding as a share of liabilities is below 5% at BBK and below 2% at BIB, they say. Both banks have sufficient liquidity to cover upcoming repayments of EU funding, Fitch experts added.

“The Negative Outlooks on the banks’ ‘B’ Long-Term IDRs mirror that on the Republic of Belarus (B/Negative) and reflect the sovereign’s potentially weaker financial position, which would undermine its ability to provide support. The sovereign’s external position remains strained, with international reserves low in relation to funding requirements, and the new EU sanctions restrict the government’s access to EU lenders. This, also in light of the potential crystallisation of contingent liabilities from the large public sector, could constrain financial flexibility of the authorities to provide support, particularly in foreign currency, in case of need,” Fitch concluded.

On June 24, the Council of the EU introduced new restrictive measures against the Belarusian regime to respond to the escalation of serious human rights violations in Belarus and the violent repression of civil society, democratic opposition and journalists. Among other things, access to EU capital markets was restricted; EU member states were required to take action to limit the involvement in Belarus of multilateral development banks of which they are members’.

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