Moody’s: Angolan Banks FAQ answers investors’ questions on correspondent banking pullback

London (Capital Markets in Africa) – In a new report Moody’s Investors Service answers investors’ questions about the credit implications for Angolan Banks, such as Banco Angolano de Investimentos, S.A. (BAI, BCA b3, LT local currency bank deposits B1, Negative), of the recent reduction in correspondent banking services.

The report, “Banco Angolano de Investimentos, S.A. (BAI) Case Study: Angolan banks face challenges meeting dollar obligations following loss of correspondent bank relationships,” is now available on www.moodys.com. Moody’s subscribers can access this report via the link at the end of this press release. The research is an update to the markets and does not constitute a rating action.

In recent years, US-regulated banks have significantly reduced the level of dollar correspondent banking services they provide to other banks globally, due to stricter rules intended to prevent money laundering and the financing of terrorist activities. This loss of dollar correspondent bank relationships has resulted in banks in Africa and other regions, experiencing difficulties in carrying out dollar transactions.

“Dollar correspondent banking relationships are vital to the Angolan banking system, given Angola’s dependence on international trade,” said Akintunde Majekodunmi, a Vice President at Moody’s. “Despite the efforts to reduce the level of dollarization in the domestic banking system, Angola will continue to rely heavily on correspondent banks for international transactions.”

Angolan authorities and banks are trying to address the compliance concerns of US regulators in order to restore dollar correspondent banking relationships, and some progress has been made. For example, in February 2016, the Financial Action Task Force (FATF), which sets standards for anti-money laundering and anti-terrorism financing, removed Angola from its list of nations that fail to meet international standards. However, based on feedback from industry participants, Moody’s doesn’t expect a return of dollar correspondent bank services in the near-term.

Despite the loss of these relationships, on 21 July 2017 Moody’s confirmed BAI’s long-term ratings, given its demonstrated capacity to continue to meet its dollar obligations by preserving some of its dollar correspondent bank relationships, and by using other foreign currencies as an alternative route to complete dollar transactions.