Global credit-rating agency Moody's says the Bangladesh Bank cyber-heist bodes ill for market confidence, investment or financial stability in the country if there is an escalation of its implications.
Though the direct credit implications of the cyber-heist are minimal, but, if there is a potential escalation, it may hurt market confidence, said Moody's Investors Service in an analysis of what is being dubbed as world's worst digital bank theft.
Besides, the country's investment or financial stability could be negatively affected, according to the US-based financial watchdog's latest analysis, which was submitted to the authorities concerned recently for consideration.
The Moody's mentioned that the trans-national cyber-heist in March 2016 resulted in a loss of US$81 million (0.3 per cent of total foreign exchange reserves) from Bangladesh Bank's account at the New York Federal Reserve.
"There was a change in management at the central bank after the incident and closer regulation over the banking system and a focus on strengthening security systems could follow," the rating agency said in its 25-page report.
The report also says state-owned banks (SoBs) exhibit weak asset quality and poor profitability. Because such banks account for 30 per cent of total banking-system assets, their weak credit metrics expose the government to contingent liabilities.
"But the strong funding and growing share of privately run banks limit the risk of contagion to the broader financial sector, a situation which, if it eventuates, could hurt economic output," the Moody's noted.
Non-performing loans (NPLs) from SoBs stood at 23.9 per cent of total loans, as of September 30, 2014, compared to 6.3 per cent at private-sector banks, according to the analysis.
It mentions that the authorities are implementing reforms to strengthen SoBs, including improving governance and internal controls, imposing credit-growth limits, implementing an automated financial reporting system, and gradually recapitalising them.
In 2013, the government injected a total of Tk 41 billion (US$500 million, 0.3 per cent of GDP), into the four SoBs.
It would cost around 2.25 per cent of GDP (gross domestic product) to fully write-off existing NPLs and rescheduled loans, according to IMF (International Monetary Fund) estimation. Â
On the political front, the Moody's said Bangladesh's political system is highly polarised, underpinning its assessment that political event risk is moderate.
"The emergence of domestic events of terrorism - while infrequent and isolated - could lead to geopolitical risks, if they were to become endemic," the credit rating agency warned.
It found relations between the ruling Awami League and the opposition Bangladesh Nationalist Party (BNP) fractious, rooted in a deep personal rivalry between their respective leaders, and manifested in frequent strikes and disruptions to economic activity.
"Clashes between the two parties could impede policy formulation and effectiveness, suggesting that politics pose a moderate level of risk to the sovereign credit profile," the Moody's observed.
siddique.islam@gmail.com
BB heist bodes ill for market confidence, investment: Moody\'s
Siddique Islam | Published: May 11, 2016 00:00:00 | Updated: February 01, 2018 00:00:00
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