The downgrading of Bermuda Commercial Bank by a ratings agency was yesterday criticised by Peter Horton, the bank’s chief executive officer.

Mr Horton said that the decision by Moody’s to lower the credit rating of BCB after it bought up 75 per cent of British-based finance house Private & Commercial Finance Group was unwarranted.

He added: “We do not share Moody’s view that our acquisition of a majority stake in PCFG warrants a downgrade of BCB.

“On the contrary, our well-researched assessment is that this acquisition significantly strengthens and diversifies BCB’s asset base and revenue activities.”

Moody’s reported earlier this week that it had set BCB’s long-term deposit and issuer ratings at Ba3, down from Ba2, while its stand-alone baseline credit assessment dropped from ba2 to ba3 and the counterparty risk was lowered from Ba1 to Ba2.

The review came after a review launched last September in the wake of the investment in PCFG.

Moody’s said that BCB had taken on increased asset risk which reflected PCFG’s loan portfolio, consisting of high yield, high loan-to-value consumer auto finance and small and medium-sized enterprise business and leasing finance.

The ratings agency said these loans carried a much higher level of delinquent and impaired loans and a higher-loss content that BCB’s commercial loans in Bermuda.

But Mr Horton said that PCFG had weathered two decades in business and banks in Britain had been confident to lend it cash.

The PCFG share price on the London Stock Exchange has gone up by 20 per cent since BCB took a majority stake.

Mr Horton, due to stand down at the end of next month, added: “It is a profitable business having grown by a combination of acquisitions and organic growth. The company commands a small market share, allowing the scope for very material growth, especially now that PCFG has the support of a bank.”

He said that BCB holding company Somers Group had also had a longstanding investment in the British firm and it was well known to BCB, which also carried out extensive due diligence and got the consent of British and Bermudian regulators before it bought the stake.

Mr Horton added that the Basel III rules on bank solvency and stability had been “a fundamental challenge” to the industry and sparked a move by banks to review their asset and capital allocation policies.

He said: “The five-year strategic plan we adopted in February 2015 identified the need for us to diversify earnings and our balance sheet ahead of the Basel III implementation.

“Acquiring PCFG was a major step towards balance sheet diversification. It allowed us to reduce our reliance on relatively capital-expensive assets, including some in our bond portfolio, which was timely ahead of the current turbulence in world investment markets.”