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Bloomberg: Moody’s Considers Downgrades for Europe Banks

November 29, 2011, 07:00 AM
Filed Under: Banking News

Bloomberg reported that banks in fifteen European nations may have their subordinated debt ratings cut by Moody’s Investors Service Inc. to reflect the potential removal of government support. Nations under consideration for such cuts include the largest lenders in France, Italy and Spain.

According to the report, all subordinated, junior-subordinated and Tier 3 debt ratings of 87 banks in countries where the subordinated debt incorporates an assumption of government support were placed on review for downgrade, the ratings company said in a statement today. 

Moody’s also indicated the subordinated debt may be cut on average by two levels, with the rest lowered by one grade.
Lenders in Spain, Italy, Austria and France have the most ratings to be reviewed as governments in Europe face limited financial flexibility and consider reducing support to creditors, the rating company said. Moody’s has said that a “rapid escalation” of Europe’s sovereign debt crisis threatens the entire region.
The Bloomberg report quotes Moody’s as stating, “Systemic support for subordinated debt may no longer be sufficiently predictable or reliable to be a sound basis for incorporating uplift into Moody’s ratings.

According to the Bloomberg report, Moody’s said the review will include banks such as BNP Paribas SA and Societe Generale SA, France’s biggest lenders, UniCredit SpA, Italy’s largest, and Spain’s Banco Santander SA., Zurich-based Credit Suisse AG and UBS AG will also be assessed, according to a list of lenders published by Moody’s.


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