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Moodys: 117 European banks may be downgraded

Friday 30 March 2012

According to Fitch ratings agency, 2010 showed some level of recovery in the economy as the number of credit rating downgrades issued dropped, while upgrades were on the rise. Admittedly, the figures were for companies, not countries, but how does that set the scene for 2011? After all, the ratings agencies have been rather ‘slash happy’ this month.

Here are some highlights of the action from Europe:

  • 7th March: Greece’s debt rating is cut three levels from Ba1 down to B1 by Moody’s.
  • 10th March: Spain is next to fall under Moody’s axe, as the country’s sovereign rating drops to Aa2.
  • 16th March: The long-term credit rating of Portugal’s government bonds is downgraded by Moody’s from A1 to A3.
  • 24th March: Moody’s downgrades the debt ratings of 30 Spanish banks and Fitch downgrades Portugal’s long term foreign and local currency Issuer Default Ratings by two notches from A+ to A-. S&P also joins in, slashing Portugal’s debt rating to BBB from A-.
  • 28th March: The long- and short-term counterparty credit ratings of five of Portugal’s banks are cut by S&P.
  • 29th March: Both Portugal and Greece are downgraded by S&P on debt worries. Portugal went down one notch to BBB- and Greece went down two notches to BB.

 

These downgrades have seen Portugal and Greece’s borrowing rates hit unsustainable levels over the past week, with yields on 10 year government bonds in the countries rising to 8.02% and 12.568% respectively.

Despite the bad news from the ratings agencies, the euro remains relatively immune to date.

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