Ratings on three Lebanese banks lowered to ‘CCC+’

Standard & Poor’s Ratings Services said that it lowered its long-term counterparty credit ratings on three Lebanese banks: Bank Audi SAL – Audi Saradar Group, Bankmed, s.a.l., and Blom Bank sal to ‘CCC+’ from ‘B-‘. At the same time, the long-term ratings on the three banks were removed from CreditWatch with negative implications, where they had been placed on Nov. 27, 2007. In addition, the ‘C’ short-term counterparty credit ratings on Banque Audi SAL – Audi Saradar Group and Bankmed s.a.l. were affirmed. The outlook is stable.

The ratings on all three banks reflect the high risks inherent in operating in Lebanon that are a result of the country’s macroeconomic problems–notably the government’s high indebtedness, fiscal deficit, and above all, fragile political stability.

The ratings on Lebanon were lowered as a result of the current political impasse that has raised tensions within Lebanon and for which no easy resolution appears in sight. This stand-off has increased the risk of social instability that could shake the confidence in the financial sector, thereby compromising domestic banks’ ability to lend to the government. The risk has also risen of a protracted policy vacuum that would delay reforms crucial for putting Lebanese public finances on a more sustainable path.