CABEI - Central American Bank for Economic Integration

CABEI on the verge of becoming the best risk in Latin America

   By: CABEI    News   

Moody's Investors Service assigned a positive outlook to CABEI's A1 rating, which reflects the incorporation of the Republic of Korea as an extraregional member and the sustained improvements in its capital adequacy and liquidity ratios.

Tegucigalpa, June 20, 2018.- Moody's Investors Service (Moody's), revised the outlook on the Central American Bank for Economic Integration (CABEI) ratings from "stable" to "positive," and affirmed its 'A1' long-term issuer credit rating.

According to the statement issued by Moody's, the "positive" outlook on CABEI's 'A1' rating reflects the impact of the Republic of Korea’s (Aa2) incorporation as a non-regional member of the Bank, and the sustained improvements that the Bank has had on the ratios used by the Rating Agency to assess the capital adequacy and liquidity position of multilateral banks.

In this regard, Moody's indicated that the Republic of Korea’s incorporation will further diversify and strengthen CABEI's shareholder base, highlighting that the country will become the second largest non-regional member in terms of shareholder participation, through a US$450 million capital subscription equivalent to 9.3% of the Bank's subscribed capital, which in turn takes  capital subscribed by 'Aa' rated members from 11% to 20%.

For his part, CABEI’s Executive President, Dr. Nick Rischbieth, stated that the improvement in the Bank's rating outlook by Moody's is the result of the decisions taken by the Board of Governors to modify the institution’s Constitutive Agreement, which included the redefinition of the Central American region through the inclusion of Panama, the Dominican Republic and Belize, and which in turn have bolstered the incorporation of new members and have allowed for the process of diversifying the loan portfolio and strengthening the institution's preferred creditor status.

In this regard, the Executive President stressed the importance for CABEI of attracting a highly rated member like the Republic of Korea, which has had a positive and immediate impact on the Bank's financial profile and will strengthen its institutional governance, while also enhancing the benefits of the cooperation schemes signed between CABEI and Korean institutions in favor of its member countries.

Moody's also highlighted the positive trend in the Bank's capital adequacy and liquidity position. Regarding capital adequacy, the Rating Agency highlighted both CABEI’s loan portfolio diversification process resulting from the amendments to its Constitutive Agreement and the recent approval of the Bank's eighth capital increase from US$5 billion to US$7 billion. In relation to CABEI's liquidity position, Moody's highlighted its asset and liability management framework, which has enabled it to optimize its debt service coverage.

Similarly, Dr. Rischbieth highlighted that CABEI's eighth capital increase constitutes an indisputable sign of the support that member countries are granting to the Institution, and would represent CABEI's second capitalization process in the last decade, in contrast to the challenges faced by multilateral banks on this issue.

Finally, the Executive President stated that the improvement in Moody's credit rating to the Aa3 category is expected to materialize in the coming months, and as such CABEI will have the best credit rating in all of Latin America.