What Investors Want To Know: Impact Of Sri Lanka National Scale Recalibration On Bank Ratings

Following Fitch Ratings’ downgrade of Sri Lanka’s sovereign rating to ‘CCC’ from ‘B-‘ on 27 November 2020, the Sri Lankan National Rating scale was recalibrated to reflect changes in the relative creditworthiness among Sri Lankan issuers.

The recalibration of the Sri Lankan National Rating scale resulted in the revision of some ratings due to changes in relativities in the portfolio. After the recalibration, the highest national rating for domestic banks with ratings driven by their intrinsic credit profile is ‘AA-(lka)’. This is the highest point on the national scale that corresponds to an international scale rating of ‘CCC’.

We now have six banks rated at ‘AA-(lka)’: Bank of Ceylon (BOC), People’s Bank (Sri Lanka), Commercial Bank of Ceylon PLC (CB), Hatton National Bank PLC (HNB), Sampath Bank PLC and Cargills Bank Limited.

The National Ratings of other Sri Lankan banks rated below this level on the national scale were not affected by the recalibration. Sri Lanka’s national scale ratings are denoted by the unique identifier ‘(lka)’. National scales are not comparable with Fitch’s international ratings scales or with other jurisdictions’ national rating scales.

The following are some recent questions from investors about the recalibration and impact on bank ratings in Sri Lanka:

What Was the Reason for the Recalibration of the National Ratings on Sri Lankan banks?

Why Are Sri Lankan Banks Not Rated Above the Sri Lankan Sovereign?

Is the Sovereign Rated ‘AAA’ on the National Rating Scale?

Which Sri Lankan Bank National Ratings were Affected by the Recent National Scale Recalibration?

What Effect Did These Rating Revisions Have on Other Ratings Linked to These Banks?

Why Were the National Ratings on Other Banks Not Affected by the Recalibration?

What is the Difference Between a Rating Revision and a Rating Upgrade or Downgrade?

Link to answers by Fitch Ratings: What Investors Want To Know: Impact Of Sri Lanka National Scale Recalibration On Bank Ratings