Ratings Agency Fitch puts PNB's viability rating on negative watch following $1.77 billion loan fraud; A lesson to learn for Nepalese banks
Ratings agency Fitch on Tuesday, placed Punjab National Bank's (PNB) Viability Rating of 'bb' on Rating Watch Negative (RWN), following the Rs 11,300 crore fraud reported in the bank's Brady House branch in Mumbai. The decision means that the country's second largest lender may see a rating downgrade.
“The RWN (rating watch negative) reflects the possibility of a downgrade of PNB’s Viability Rating following the detection of a large fraud in one of the bank’s branches amounting to $1.8 billion. While the exact financial impact from this event is still being ascertained, it has raised questions on both internal and external risk controls as well as the quality of management supervision considering that the fraud went undetected for several years,” Fitch said in a note.
Viability ratings (VRs) of Fitch are designed to be internationally comparable and represent the rating agency's view as to the creditworthiness of an issuer. A poor viability rating refers to bank's inability to maintain ongoing operations and to avoid failure. On a scale of 'aaa' to 'f', PNB's current rating of 'bb' suggests mediocre performance by the bank. More specifically, 'bb' rating refers to moderate degree of fundamental financial strength. However, the rating also means that certain degree of vulnerability exists in the bank's state of affairs.
Fitch said that it will resolve Rating Watch once further clarity emerges on extent of control failures and the impact on PNB's financial position.
In case Fitch decides to downgrade PNB's rating, the bank may slip to 'b'.
( The Economic Times)
“The RWN (rating watch negative) reflects the possibility of a downgrade of PNB’s Viability Rating following the detection of a large fraud in one of the bank’s branches amounting to $1.8 billion. While the exact financial impact from this event is still being ascertained, it has raised questions on both internal and external risk controls as well as the quality of management supervision considering that the fraud went undetected for several years,” Fitch said in a note.
Viability ratings (VRs) of Fitch are designed to be internationally comparable and represent the rating agency's view as to the creditworthiness of an issuer. A poor viability rating refers to bank's inability to maintain ongoing operations and to avoid failure. On a scale of 'aaa' to 'f', PNB's current rating of 'bb' suggests mediocre performance by the bank. More specifically, 'bb' rating refers to moderate degree of fundamental financial strength. However, the rating also means that certain degree of vulnerability exists in the bank's state of affairs.
Fitch said that it will resolve Rating Watch once further clarity emerges on extent of control failures and the impact on PNB's financial position.
In case Fitch decides to downgrade PNB's rating, the bank may slip to 'b'.
( The Economic Times)
