S&P Grades Bermuda An ‘Intermediate Risk’
The Standard & Poor’s Ratings Services said today [Nov.9] it is assigning its Banking Industry Country Risk Assessment [BICRA] on Bermuda at group “3″. It is also assigning an economic risk score of “3″ and an industry risk score of “3″.
“We have reviewed the banking sector of Bermuda [AA/Stable/A-1+] under our updated BICRA methodology,” said the American ratings agency. “Our criteria define the BICRA framework as one ‘designed to evaluate and compare global banking systems’.
A BICRA analysis for a country covers rated and unrated financial institutions that take deposits, extend credit, or engage in both activities. A BICRA is scored on a scale from group ’1′ — the lowest risk — to group ’10′ — the highest risk). Other countries in BICRA group ’3′ are Korea, Chile, the UK, and the US.
“Our economic risk score of ’3′ reflects our opinion that Bermuda has an ‘intermediate risk’ profile in terms of ‘economic resilience’ and ‘economic imbalances’, and a ‘low risk’ profile in terms of ‘credit risk in the economy’ as our criteria defines those terms.”
Standard & Poors said while Bermuda ranks among the world’s highest income economies on a per capita basis, the island’s “weak economic diversification” and “high dependence on the international financial sector” along with some upscale tourism drive its assessment of “economic resilience” as “intermediate risk.”
The Bermuda currency’s long-standing fixed exchange rate at parity with the US dollar offers a stable bulwark for its important finance and tourism sectors, but effectively “relinquishes monetary control, as in many other small international financial centres.”
