Bangladesh’s banks are among the most vulnerable in Asia-Pacific to a sweeping hike in US import tariffs, Moody’s Ratings said, warning that the country’s heavy dependence on garment exports and fragile financial buffers have left its banking sector exposed to rising credit stress.

Moody’s Ratings has downgraded Bangladesh’s banking system outlook from “stable” to “negative”, citing rising asset risks and worsening economic conditions.

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.