S&P Downgrades Jordan’s Arab Bank

Standard & Poor’s Ratings Services announced on 28 November that it has lowered its long term counterparty credit ratings on Jordan-based Arab Bank PLC to BB from BB+. The short term counterparty credit ratings were affirmed at B, with a negative outlook. S&P said that the rating action follows recent negative rating action on the Kingdom of Jordan (MEES, 28 November). It noted that the lowering of the local currency ratings for Jordan is based on S&P’s new sovereign criteria, adding that “among several factors, local currency ratings can only enjoy an uplift from the foreign currency ratings under an independent monetary policy with a track record of a floating exchange rate.” S&P pointed out here that the Jordanian dinar has been pegged to the US dollar since 1995 and as a result the local currency ratings on Jordan are equalized with the foreign currency ratings BB/B.

S&P went to say that the ratings on Arab Bank PLC reflect the strengths of the Arab Bank Group (which is not rated) but also its incorporation in Jordan, where the bank is subject to sovereign risk. Therefore the ratings on Arab Bank PLC are constrained by the local currency ratings on the sovereign. S&P adds that with total assets of $45bn on 30 September 2011, the Arab Bank Group is one of the Middle East’s largest banking organizations. It operates in 30 countries across five continents.

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