Fitch Ratings downgraded the rating of three banks including Bank of Ceylon, National Savings Bank and DFCC Bank yesterday (5), following the downgrade of the Sri Lankan sovereign rating on 24 April. Fitch has downgraded Sri Lanka’s largest bank Bank of Ceylon's (BOC) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'B-' from 'B'. The Outlook remains Negative. At the same time, Fitch has downgraded BOC's Viability Ratings (VR) to 'b-' from 'b', Support Rating to '5' from '4', and its Support Rating Floor to 'B-' from 'B'. National Savings Bank's (NSB) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) has been downgraded to 'B-' from 'B'. The Outlook remains Negative. Fitch has also downgraded DFCC Bank PLC's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'B-' from 'B' and its Viability Rating (VR) to 'b-' from 'b'. The Outlook on the Long-Term IDR is Negative. The Short-Term IDR has been affirmed at 'B'. The Support Rating and Support Rating Floor have been affirmed at '5' and 'No Floor', respectively. The rating action follows the downgrade of the Sri Lankan sovereign rating on 24 April 2020, which Fitch said reflects the impact of the escalating coronavirus pandemic on Sri Lanka's economy. Fitch revised its 2020 outlook on Sri Lanka's banking sector to negative in March 2020 saying the coronavirus pandemic poses increased risks to the previously anticipated expansion in the economy, which will affect performance of the banks. “We have revised our assessment of Sri Lankan banks' operating environment to 'b-'/negative, from 'b'/negative, primarily to reflect the heightened risk of doing business in the jurisdiction. Under Fitch's base-case scenario, we forecast the world economy and the Sri Lankan economy to contract in 2020 by 3.9% and 1.0%, respectively. We expect banks' financial profiles to come under stress from the increased challenges in the operating environment, and their key credit metrics are likely to be weaker than our previous expectations, notwithstanding regulatory reliefs,” it noted. Fitch said it expects GDP growth of 4% for Sri Lanka in 2021, on the basis of a gradual recovery in tourism receipts beginning in late 2020. However, it added this forecast is subject to an unusually high degree of uncertainty and downside risk, depending on the evolution of the pandemic both within Sri Lanka and globally. Correspondingly, the outlook for the operating environment assessment is maintained at negative - to reflect the possibility of further downside risks should the potential impact of the economic fallout from the coronavirus pandemic become more pronounced or linger.