Research Update: Andorra Ratings Lowered To 'BBB-/A-3' On Risk Of Contingent Liabilities Materializing; Still On CreditWatch Negative

Andorra?s financial sector presents an increased risk profile, in our view, following the U.S. Department of the Treasury's Financial Crimes Enforcement Network's investigation of Banca Privada d?Andorra, and we estimate this may result in contingent liabilities for Andorra beyond our previous expectations. In our assessment, a rapid increase in nonresident assets under management by Andorran financial institutions since 2011 and a far-reaching expansion of the banks' international footprint have significantly increased reputational and other financial risks, straining the response capacity of Andorran authorities. We also estimate that financial sector uncertainty may negatively affect Andorra?s growth prospects, given the weight of the sector on overall employment and GDP. As a consequence, we are lowering our ratings on Andorra to 'BBB-/A-3' from

...Andorra's financial sector presents an increased risk profile, in our view, + following the U.S. Department of the Treasury's Financial Crimes Enforcement Network's investigation of Banca Privada d'Andorra, and we estimate this may result in contingent liabilities for Andorra beyond our previous expectations. In our assessment, a rapid increase in nonresident assets under management by + Andorran financial institutions since 2011 and a far-reaching expansion of the banks' international footprint have significantly increased reputational and other financial risks, straining the response capacity of Andorran authorities. We also estimate that financial sector uncertainty may negatively affect Andorra's + growth prospects, given the weight of the sector on overall employment and GDP. As a consequence, we are lowering our ratings on Andorra to '###-/A-3' from + '###/A-2' and maintaining our negative CreditWatch. The negative CreditWatch reflects the potential negative impact of ongoing + investigations...

Research Update