Rating agency Fitch Ratings downgraded the Bank of Costa Rica’s viability rating, just like Moody’s rating earlier this month.
According to a report released on Thursday, the rating agency decided to lower the rating from “bb” to “bb-” on the international scale and simultaneously placed it in negative observation.
The decline in the viability of the BCR is due to changes in Fitch’s assessment of the bank’s risk management and appetite.
This adjustment was made after two members of the board resigned their positions, and after the government temporarily suspended the rest of directors and initiated a regular sanctioning process.
The bank and board members have been involved in a scandal for lending to a company with allegations of influence peddling and oversight by the BCR board,”
said the report.
They also indicated that the government appointed a new board of directors and so far reputational risk has not materially affected the financial performance and stability of BCR’s deposits.
However, Fitch believes that the events that have occurred show a significant weakness in the bank’s corporate governance framework, which has impaired the protection of creditor and shareholder interests, question and test the quality of its risk controls, and distract the executive bodies of the entity in the fulfillment of its usual strategic objectives.
The Negative Observation reflects that viability could be further reduced by the occurrence of additional corporate governance events that potentially weaken BCR’s funding profile and the quality of management.
According to Fitch’s methodology, a bank’s risk ratings could be under significant downward pressure if significant corporate governance weaknesses or failures are not effectively mitigated.