Fitch Downgrades Uruguay Bank Rtgs Following Sovereign Rating Action.

    Business Editors

    NEW YORK--(BUSINESS WIRE)--July 31, 2002--Fitch Ratings has
downgraded the long-term foreign currency ratings of Banco Sudameris'
Uruguayan branch, Banco Santander Uruguay, and HSBC Bank (Uruguay) to
'B-' from 'B+'. The ratings below the sovereign ceiling reflect
growing possibilities that restrictions on deposits may be put in
place across the banking system which could affect all financial
institutions in the market. In addition, the long-term foreign
currency rating of Banco Comercial del Uruguay was downgraded to 'CCC'
from 'B+'. The lower rating on Banco Comercial reflects its need for
support from the Uruguayan government, and the growing possibility
that its creditors may face some restructuring of the bank's
obligations. The ratings remain on Rating Watch Negative. These
ratings follow a downgrade of Uruguay's sovereign ratings yesterday,
reflecting the continued and pronounced drop in banking system
deposits and the associated fall in gross official reserves. The
sovereign action also reflects the deterioration of public debt
dynamics as a result of the devaluation and ongoing recession, all of
which have contributed to a marked worsening in the operating
environment.
    With the creation of the FFSB (Fondo de Fortalecimiento del
Sistema Bancario), to be funded at $2.5 billion, the government has
established the mechanism to provide liquidity and solvency support to
its troubled domestic banks. The announcement of the FSB helped
moderate what had been growing outflows of resident deposits. Full
funding at the proposed level, however, will not likely be reached in
the immediate future, as it depends on further disbursements from
multilateral institutions and domestic bond issues, the timing and
completion of which continue uncertain. Even when fully funded,
however, the resources proposed for the FFSB will prove sufficient to
restructure the local banking system only if the government is able to
stem the current pace of deposit outflows, an outcome that at this
point remains unsure. An indication of local uncertainties was the
suspension yesterday of already intervened Banco de Montevideo and
Caja Obrera, which led to the declaration of a bank holiday, as the
government appeared unwilling to continue to provide the support
necessary for the bank to meet the demands of its depositors. Should
deposit outflows across the banking system continue unabated, the
government may be forced to consider less orthodox approaches such as
capital and/or deposit controls, events which could lead bank ratings
lower. The extension of the banking holiday through the weekend may
indicate that the government will put in place exchange and/or deposit
controls. Fitch expects that deposit controls, if enacted, would
likely protect small depositors while mandating longer tenors for the
return of larger obligations. There are some indications that the
government may consider different levels of support for banks with
significant private ownership. With the largest domestically held
banks already under intervention or suspension, such private
institutions are largely controlled by foreign shareholders.

    Ratings Affected:

    Banco Comercial del Uruguay
    --Long-term foreign currency downgraded to 'CCC' from 'B+';
    --Remains on Rating Watch Negative.

    Banco Santander Uruguay
    --Long-term foreign currency downgraded to 'B-' from 'B+';
    --Remains on Rating Watch Negative;
    --Support rating '4T'.

    Banco Sudameris - Uruguay Branch
    [pilcrow (paragraph sign)]   --Long-term foreign currency downgraded to 'B-' from 'B+';
    --Remains On Rating Watch Negative.

    HSBC Bank (Uruguay)
    --Long-term foreign currency downgraded to 'B-' from 'B+;
    --Remains on Rating Watch Negative;
    --Support rating '4T'.

    --30--ik/sf*

    CONTACT: Fitch Ratings
             Peter Shaw, 212/908-0553,
             Ricardo Chaves, 212/908-0606,
             Linda Hammel, 212/908-0303, New York,
             Lorna Martin or Ana Gavuzzo, [phone],
              Buenos Aires.
             Media Relations:
             James Jockle, 212/908-0547, New York.

    KEYWORD: NEW YORK INTERNATIONAL LATIN AMERICA
    INDUSTRY KEYWORD: BOND/STOCK RATINGS
    SOURCE: Fitch Ratings