Moody’s has downgraded Bangladesh’s banking sector to “very weak” from “weak”, citing worsening client confidence, limited transparency and inadequate financial safeguards over the past year.

Moody’s downgrade of Bangladesh’s economic outlook from stable to negative is expected to have limited immediate impact on the economy, but may affect international trade for banks, leading to higher costs for letters of credit (LCs) and more stringent reviews of private sector credit, experts stated.

“The downgrade reflects heightened political risks and lower growth, which increases government liquidity risks, external vulnerabilities and banking sector risks, following the recent political and social unrest that led to a change in government,” said Moody’s.