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Moody's upgrades Guatemala's Bantrab on improved corporate governance measures

Moody's on Oct. 16 upgraded Guatemala-based Banco de los Trabajadores' ratings and assessments following marked improvements in the bank's corporate governance, risk management and control practices.

Included in the ratings upgrades are the bank's long-term local and foreign currency deposit ratings to B1 from B3, long-term local and foreign currency counterparty risk ratings to Ba3 from B2, baseline credit assessment and adjusted baseline credit assessment to "b2" from "caa1," and long-term counterparty risk assessment to Ba3(cr) from B2(cr).

Bantrab, as the bank is known, took credit-positive measures to fix the governance crisis it faced in 2016, following the arrest of its former executives for misuse of funds, Moody's noted. Since then, the bank has replaced most of its board and senior management and set in place a stricter selection process for its board. It also carried out changes in its internal processes regarding anti-money laundering policies, risk management and compliance functions, it noted.

"The changes have resulted in a gradual recovery of its correspondent banking relationships, which were key to reduce uncertainties around Bantrab's ability to pay its cross-border obligations," the rating agency added.

However, Moody's said it still sees reputational risks for Bantrab given potential investigations on past events, noting that the corporate governance changes will need to be tested over time.

Moody's also highlighted the bank's improved profitability and capitalization as well as ample liquidity buffers. However, these are counterbalanced by the bank's relatively expensive funding structure, which remains concentrated on large term deposits.

The rating agency considers the bank as having moderate probability of support from the Guatemalan government in case of stress, given its status as a systemically important bank.

In addition to the upgrades, Moody's affirmed the bank's short-term local and foreign currency deposit and counterparty risk ratings of Not Prime as well as its short-term counterparty risk assessment of Not Prime(cr).