International rating agency Fitch has downgraded the rating of the International Investment Bank's (IIB) by two notches to BBB from A- and put it on Rating Watch Negative on the severe impact of Russian invasion in Ukraine.

The bank's ESG was reduced from 5 to 4 as well.

The bank, active in Romania both as a creditor and through the bonds issued on the Bucharest Exchange (BVB), has the Romanian state as a shareholder as well (6.1%).

Russia is IIB's largest shareholder and in response to its invasion of Ukraine, the Czech Republic, Romania, Slovakia and Bulgaria, together accounting for 35% of the bank's paid-in capital, have announced their decision to discontinue their participation as shareholders in the bank, although at the time of publication none of these countries has formally started procedures to leave the bank.

Russia's invasion of Ukraine impacts IIB through multiple channels, Fitch explains. The bank's exposure to the Russian debtors is one. Russian borrowers accounted for around 19% of IIB's loans and around 6% of its treasury assets as of end-2021.

In Fitch's view, the macro-financial shock in Russia will significantly affect the credit quality of these exposures, as illustrated by the recent downgrades of the Russian sovereign to C from BBB before the invasion.

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andrei@romania-insider.com