S&P Global Ratings on Dec. 21 lowered its global scale long-term issuer credit ratings on Banco de Costa Rica and Banco Internacional de Costa Rica SA to B+ from BB-, with a negative outlook.

The downgrades follow a similar action on Costa Rica's sovereign credit ratings, which the rating agency recently lowered due to the government's high debt burden and poor debt management, among other reasons.

Costa Rica's banking system may experience a moderate erosion in asset quality in the coming year, S&P said in announcing the sovereign action, adding that nonperforming loans in the sector are expected to reach 3% by year-end 2018 and may rise a bit more in 2019.

In downgrading the two banks, S&P said Costa Rican lenders face growing economic challenges due to the country's consistently high fiscal deficits and slowing GDP growth.

Meanwhile, S&P maintained the stand-alone credit profile at "bb" for Banco Internacional de Costa Rica and at "bb-" for Banco de Costa Rica. The Costa Rican government owns both banks.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.