Moody’s Investors Service lowered the ratings of South Africa’s four largest banks and could issue further cuts after the collapse of African Bank Investments, dragging down the country-specific exchange traded fund.

The iShares MSCI South Africa ETF (NYSEArca: EZA) fell 0.4% Tuesday. Nevertheless, the fund is still up 11.3% year-to-date.

Moody’s cut the local-currency deposit ratings of Standard Bank Group, FirstRand, Nedbank Group and Absa Bank by one level to Baa1, the third-lowest investment grade level, from A3, reports Robert Brand for Bloomberg. Additionally, the long-term foreign-currency ratings of all four banks and Investec were put under review for a downgrade.

The ratings agency is placing greater scrutiny over the financial sector after the South African Reserve Bank put African Bank Investments under curatorship on Aug. 10. Africa Bank reported a record loss and stated that it required 8.5 billion rand, or $800 million, in capital to keep afloat.

The central bank’s rescue bid included a 10% impairment of African Bank’s senior and wholesale debt, which Moody’s argues won’t fully protect creditors if the banks fail.

The central bank’s response, while helping contain the risk of contagion, “indicates the regulator’s willingness to impose losses on creditors,” Moody’s said in the article. “This needs to be reflected in Moody’s ratings, as debt ratings speak to both the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default.”

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