Fitch Ratings yesterday said it downgraded the short-term issuer default rating of Bermuda Commercial Bank by one notch to F3, because of “a moderate shift” towards higher-risk investments.The ratings agency also affirmed BCB's individual rating at C, which describes “an adequate bank” according to Fitch's rating definitions.“The downgrade of the short-term IDR stems from a moderate shift in BCB's balance sheet mix towards higher-risk investment securities from low-risk liquid assets,” Fitch said in its commentary.“However, Fitch recognises that BCB's liquidity remains comfortable in many international comparisons.”BCB, in which a controlling interest was bought by Permanent Investments Ltd. in April this year after a four-year effort to find a buyer, has traditionally invested extremely conservatively in liquid assets such as Treasury bonds.It avoided the investments linked to US residential mortgages that plunged many banks around the world into trouble during the financial crisis.Fitch's short-term issuer default rating downgrade from F2 to F3 indicates an opinion that the bank's short-term credit quality has fallen from “good” to “fair”.Fitch also assigned a long-term IDR of BBB- to BCB.“Fitch believes that BCB's small size and limited diversity necessitate the maintenance of strong liquidity and capital,” Fitch stated. “BCB's capital measures remain solid with a Tier 1 ratio of 27 percent at FYE10.“Going forward, this ratio is anticipated to gradually decline yet remain over 20 percent by FYE11.”Tier 1 capital consists of a bank's high-quality core capital, including common equity and retained earnings, and a key measure used by regulators to assess an institution's financial strength.BCB's 27 percent tier 1 ratio is very high. BMA stress tests, performed after the financial meltdown of 2008, required local banks to have a six percent tier 1 ratio, when factoring in the impacts of a severe economic downturn.Fitch also commented positively on the takeover of BCB by Permanent Investments.“The board has been reorganised with the addition of new members who have considerable banking expertise,” Fitch stated.“Since the ownership change, deposit and customer flows have turned positive. However, significant work still needs to be done in terms of diversifying BCB's product offering and building up its core profitability.“BCB's small size and limited diversity are expected to constrain any upside to ratings at least for the foreseeable future.”Established in 1969, BCB focuses on corporate and private banking services including deposits, cash management, trust, fund administration and corporate services.