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.

Bangladesh’s credit rating will depend on maintaining political stability and the interim government committing to structural reforms, said US ratings agency Moody’s.

Moody's cut credit ratings of several small to mid-sized U.S. banks on Monday and said it may downgrade some of the nation's biggest lenders, warning that the sector's credit strength will likely be tested by funding risks and weaker profitability.

Government must critically examine Moody's credit downgrade and respond properly