Moody’s Changes Bermuda’s Macro To Moderate

April 4, 2016

Moody’s Investors Service changed the Macro Profile for Bermuda to “Moderate” from “Moderate +” saying it is to “reflect the lowering of its assessment for institutional strength based on the World Bank’s World Wide Governance Indicators for rule of law and government effectiveness.”

The ratings agency said, “The change in the Macro Profile does not affect the financial factors or standalone baseline credit assessment [BCA] of The Bank of N.T. Butterfield & Son Ltd.[A3, negative], the only rated Bermudian bank.

“Moody’s lowered its assessment of Bermuda’s institutional strength to Very High from Very High+, as a result of the lowering of the World Bank’s World Wide Governance Indicators for rule of law and government effectiveness, by six and one level, respectively, in accordance with its bank rating methodology.

“The change in profile reflects the weaker assessment of this key macro strength of Bermuda, as well as its low score for economic strength relative to both Moderate+ and Moderate peers.

“Bermuda’s institutions nevertheless continue to score highly compared with other rated sovereigns according to the World Bank survey.

“Strong scores for government effectiveness and rule of law reflect the government’s strong willingness to respect contracts and repay debt, as well as its capacity to promote economic policies that support growth.

“Bermuda’s regulatory framework supports the development of a globally competitive insurance industry, which is a major component of the economy. Banking regulations reflect global standards as Basel III capital and liquidity requirements became effective in 2015.

“Bermuda’s Moderate Macro Profile represents a balance of Bermuda’s very high institutional strength and a limited susceptibility to event risk, against the challenges of a small economy, with limited diversification and poor growth of recent years, and despite the island’s high GDP per capita.

“Bermuda also lacks a central bank or true lender of last resort, leaving it with no institutionalized support mechanism to assist banks in the event of stress.”

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Comments (7)

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  1. Terry says:

    Everything is getting very “Moody”

  2. Jus' Askin' says:

    :-(

  3. Reality Check says:

    For those who wonder what this is all about, this is not a full Credit Rating report. Instead, it is more like a passing comment in the wake of a past dAgency review, a comment after a cursory checkup. A full review would go into more detail and would have to be commissioned as well as paid for by the Government of Bermuda.

    The key takeaway is that Moody’s have made a small downward adjustment. Considering that Bermuda faces a likely full review sometime in 2016, this should be seen and heard as a little tinkling warning bell.

    • Terry says:

      Thus my Moody comment.
      What is the difference between a wind turbine and a desk fan.

      Shalom.

    • Trimonious says:

      I don’t think sovereign ratings are paid for.

  4. Coffee says:

    Bob Richards didn’t learn anything of value from Triminghams .