Eyes Skinned

Sept 05, 2007 (LBO) – Fitch Sri Lanka said it was maintaining a rating watch on six regional banks which was imposed following a government announcement that they would be merged with two other newly created state banks. Fitch put five regional banks on rating watch 'evolving' indicating that the rating could be changed after when final outcome of becomes concrete in December 2006.

It put the lowest rated Sabaragamuwa Development Bank which had a BBB- (lka) which is still in the investment grade on rating watch 'positive' indicating that the final outcome has a potential for an upgrade.

Rajarata Development Bank (RaDB), rate 'BBB+(lka)', Ruhuna Development Bank (RuDB) rated 'BBB+(lka)', Wayamba Development Bank (WDB) rated 'BBB+(lka)', Kandurata Development Bank (KDB): 'BBB(lka)', Uva Development Bank (UDB): rated 'BBB(lka)' were all put on rating watch 'evolving'.

The banks were put on rating watch following a budget speech which said they would be merged with two state banks, Lankaputhra Development Bank and SME Bank which were created following election promises.

At the time independent economic analysts were concerned about the decision as a newly-created state bank which is set up following an el