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Fitch downgrades Panama's Balboa Bank after regulator's intervention

FitchRatings on May 6 lowered its long-term rating on Balboa Bank & Trust Corp. to D(pan) from BBB-(pan) followingPanamanian banking regulator SBP's recent decisionto seize control of the bank after it was sanctioned by the U.S. Treasury Departmentfor alleged links to money laundering.

Fitchalso cut the bank's short-term rating to D(pan) from F3(pan).

The regulatorhas suspended all of the bank's operations for 30 days, which will prevent it frommeeting its financial obligations, including reimbursing customer deposits, Fitchnoted.

The bank'sU.S. assets have also been frozen as a result of the Treasury Department's actions,which could impact its liquidity, the rating agency warned.

"Althoughthe SBP's action is due to factors beyond the intrinsic financial profile of theentity, Balboa Bank's reputation has been significantly damaged," Fitch said.

However,even though the bank's financial profile could be weakened by the regulator's intervention,its ratings could improve in the future if it shows "sustained and timely compliance"with its payment obligations, Fitch added.