S&P said in a statement it lowered the country's rating from BBB+ to BBB, which is two notches above so-called junk status.

It also placed Andorra, which is wedged between Spain and France in the Pyrenees mountains, on negative credit watch. That means another downgrade is possible.

The downgrade came four days after Banca Privada d'Andorra was deemed a "primary money-laundering concern" by the US Treasury Department, which puts it at risk of being shut out of the US financial system.

S&P noted uncertainty about BPA and "possible consequences on the rest of the country's banking system and the government's medium-term fiscal position."

Andorra replaced the board of BPA on Thursday and fired several managers after taking over management of the bank. Spain and Panama also took over BPA's units in those countries.

The Treasury Department said BPA managers helped launder money, including US$2 billion allegedly siphoned from the Venezuelan state oil company, Petroleos de Venezuela SA.

It also said one unnamed high-level BPA manager accepted "exorbitant commissions" to develop shell companies that helped launder the Venezuelan company's money.

Two other BPA managers, again unnamed, were also said to have helped two Russian and Chinese men '€” arrested before the Treasury Department notice '€” to launder money. Money laundering was also said to have been performed for "numerous" Spanish business owners.

Andorra has a population of 85,000 and is known as a destination for skiing, shopping and banking. (*****)

Popular

The erosion of civil supremacy: A quiet shift in Indonesia’s statecraft

May was world's second-hottest on record, EU scientists say

Holidays sustain consumer spending post-Ramadan