INSUBCONTINENT EXCLUSIVE:
Rating following the completion of an exchange of treasury bonds for longer-dated ones, which forms a part of the broader domestic debt
depositor confidence in the banking system, leading to a widespread default within the financial system, including for non-bank financial
As such, we expect the banks to continue to service their local-currency obligations, given their better funding and liquidity profiles
to reflect the potential for deterioration in their creditworthiness relative to other entities on the Sri Lankan national ratings scale
while access to wholesale foreign-currency funding remains constrained.Further clarity around the sovereign debt restructuring process,
particularly on the foreign-currency debt, that points to a reduction in stresses that have affected the banking sector in the past several
quarters, would result in a resolution of the RWN with affirmation of the bank ratings.While the local banks have been spared from the rupee
debt restructuring, we believe that the broader economic conditions remain challenging as reflected in the expected contraction of the
economy and high volatility of economic variables
This may still place downward pressure on individual credit profiles, particularly for NBFIs, which tend to be more exposed to cyclically
nearing completion, uncertainties prevail over the completion of the foreign-currency sovereign debt restructuring
foreign-currency sovereign bonds, albeit they make up a small share of sector assets (3.6% of assets at end-1H23).--Fitch Ratings
