Fitch Ratings said downside risks would further pressure Bolivian bank ratings if political and social tensions in the country continue over a long period.

Following violent protests that had led to the resignation of Evo Morales as president, banks have seen declining deposits and and rising deposit costs. Fitch expects deposit volatility to linger in the near term, but banks may be forced to turn to external and alternative funding to support liquidity if deposits continue to decline.

The rating agency also believes that banks would observe higher funding and credit costs if income and profitability continue to be hit by declining credit growth, which would increase banks' risk appetite to maintain margins. Although banks have solid capitalization, a large drop in profitability could further weigh on their loss absorption capacity, Fitch said.

A dampened operating environment could also take a toll on banks' delinquency levels, which would worsen the eroding trends of concentrated portfolios in regulated sectors.