Italian banks suffer credit downgrade

Standard & Poor’s has cut its credit ratings for seven Italian banks, and placed eight others on negative outlook.

S&P’s decision is a direct consequence of its downgrading of Italian sovereign debt earlier this week, on concerns about political paralysis preventing a resolution to the debt crisis.

The impact of the announcement was minimal because widely expected. The downgrading was considered almost automatic, as corporate credit is by convention not allowed to be higher than that of the host nation. Italian banks also hold about 40% of the Italian market’s debt.

S&P cut the long-term rating of retail banking group Intesa San Paolo (plus subsidiaries Banca IMI, Cassa di Risparmio Bologna and BIIS), investment bank Mediobanca and BNP Paribas subsidiaries Findomestic Banca and Banca Nazionale del Lavoro. The ratings have been cut from A+ to single-A, bringing them in line with the rating of the sovereign debt.

These banks are also on negative outlook, along with 8 other groups. Banks on negative outlook are UniCredit (plus three of its subsidiaries, UniCredit Bank AG in Germany, UniCredit Bank Austria and UniCredit Leasing), Banca Fideuram (also part of the Intesa group), Agos-Ducato, Istituto per il Credito Sportivo and Cariparma. 

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