Moody’s Investors Service said it’s considering lowering debt ratings for banks in 15 European nations reflecting the potential removal of government support.
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. The subordinated debt may be cut on average by two levels, while the rest of the debt by one grade, it said.
Lenders in Spain, Italy, Austria and France have the most ratings to be reviewed as governments in Europe face limited financial flexibility and the region’s policy makers are considering 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.
“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,” the company said in the statement.
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