Fitch Ratings Affirms AAA Rating for Fondo Nacional de Garantía

Due to support for the firm from the Colombian government, Fitch Ratings has affirmed its long-term national rating of Fondo Nacional de Garantía S.A. (FNG) at AAA(col) and set its rating outlook as “stable.”

According to the big three rating agency, the governmental support is rooted in the “strategic importance of this institution for the government’s public policies, the nation’s formal commitment to provide equity support to the entity in the face of loss deviations, and the strong capitalizations and reinvestment of profits that the FNG has received to withstand the increase in exposed risk.”

Formally, this is also outlined in Decree 1806 of 2020, a mandates that requires the national government to provide the “necessary resources to financially support FNG in the event of accident deviations,” per Fitch.

Beyond the public backing, the New York agency also noted FNG’s growing profits, strong, investment portfolio, expanding equity base, and healthy business model as a significant provider of guarantees for small and medium-sized companies, among other economic initiatives.

“FNG is a strategically important entity for the Colombian government, given that it is a vehicle through which it promotes the economic growth of SMEs, large companies and independent workers,” stated Fitch in a note to investors. “The current government’s strategy is to develop guarantees that facilitate the financial inclusion of the popular economy, the promotion of green finance, innovation and entrepreneurship.”

Finally, FNG also continues to maintain a low individual risk exposure. “The maximum value assumed by FNG in traditional guarantees is 0.1% of equity,” notes Fitch. “For its part, the PUPC included guarantees of a higher amount and the maximum risk exposure could represent 3.1% of equity (as of September 2023) in the case of bond issuances and guarantees to large companies. This is considered low compared to international standards and local peers. This exposure would tend to fall as the PUCP guaranteed portfolio matures.”