Baku, Azerbaijan, Nov. 14
By Ali Mustafayev – Trend:
S&P Global Ratings revised its outlook on Uzbekistan-based Ravnaq Bank to developing from positive, on November 13.
“We affirmed our 'CCC+/C' long- and short-term issuer credit ratings on the bank,” S&P said in a statement.
The outlook revision stems from doubts about whether Ravnaq Bank can increase its share capital to 100 billion sums (nearly $12 million) by January 1, 2019, in accordance with new banking regulation of Uzbekistan.
The bank’s authorized capital was only 22.8 billion sums as of September 30, 2017.
“Since, in our view, Ravnaq Bank's internal capital generation is insufficient to bring its capital to the target level, the bank is reliant on shareholders' ability to inject new capital. However, we consider the main shareholder's capacity to inject new capital to be uncertain,” according to the report.
S&P considers two possible scenarios for the bank. The the shareholder might provide additional capital, thereby allowing the bank to continue its operations. It is also possible that the capital could be provided in stages and over a period longer than one year.
“Although this would mean the bank might not be compliant on January 1, 2019, we think the regulator could potentially provide a waiver, or soften or postpone the requirement, especially if it concludes that a number of banks are unable to meet it.”
But if the bank cannot secure additional capital to meet new minimum capital requirements, the regulator may not be willing to provide a waiver. In that case S&P expects regulatory actions to follow, which might range from limiting certain of Ravnaq Bank's activities or withdrawing its license.
“Our 'CCC+' rating on Ravnaq Bank continues to reflect our view that the bank is vulnerable and dependent upon favorable business, financial, and economic conditions to meet its financial commitments,” said the S&P.