Bangladesh's banking sector placed In BICRA Group '8'

SINGAPORE (S&P Global Ratings) Feb. 27--S&P Global Ratings placed

Bangladesh in group '8' under its Banking Industry Country Risk Assessment

(BICRA) in a report, titled "Banking Industry Country Risk Assessment:

Bangladesh," that it published Monday.

“Our bank criteria use our BICRA economic risk and industry risk scores to

determine a bank's anchor, the starting point in assigning an issuer credit

rating. The anchor for banks operating only in Bangladesh is 'bb-'. “

“We regard Bangladesh's economic risk trend as stable. Its growth prospects

remain steady, supported by good performance in the export-focused

manufacturing sector. We expect that some banks in Bangladesh will continue to

face asset quality challenges, with sizable reported nonperforming loans, in

addition to a high level of restructured loans,”  S&P Global Ratings said.

Bangladesh's industry risk trend is also stable. We expect the central bank to

continue to address the banking industry's legacy stressed assets and gaps in

governance. But the execution of these reforms will likely be gradual, as will

be the benefits. We also expect Bangladesh's systemwide funding to remain a

relative strength.

"In our opinion, Bangladesh's low-income economy, heavy development needs, and

fiscal constraints limit its economic resilience. We consider that banks

operating in Bangladesh face substantial credit risks, with weak foreclosure

laws and underwriting standards, weak governance at some banks, and client

concentration leading to sizable stressed assets. That said, Bangladesh has

healthy growth prospects and moderate economic imbalances with credit growing

in line with nominal GDP, moderate inflation, and a satisfactory current

account position," the S & P said.

Bangladesh is in the process of implementing international regulatory

standards. However, we believe supervision has gaps and imposes limited market

discipline. Also, the banking system has overcapacity and market distortions,

in our view. A supportive core customer deposit base and low reliance on

external funding temper these weaknesses.

 -rmc//