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Moody’s Downgrades Ratings of Two Biggest Italian Banks

07 October 2011 07:55 (UTC +04:00)

Baku - APA-Economics. Ratings agency Moody’s has downgraded its credit ratings on Italy’s two biggest banks just one day after it slashed Italy’s sovereign debt rating.

Moody’s said Wednesday that the long-term debt ratings of both UniCredit and Intesa Sanpaolo were downgraded two notches from Aa3 to A2 due to lower growth prospects in recent months.

On Tuesday, Moody’s lowered the ratings on Italy’s bonds by three notches to A2, and Italian banks have come under pressure in recent weeks because of their vast holdings in Italian government bonds.

Besides its downgrade of the banks, Moody’s also cut its ratings on the debt of several state-controlled Italian companies including oil and gas group Eni and utility group Enel.

Meanwhile, the European head of the International Monetary Fund on Wednesday urged eurozone governments to pump up to 200 billion euros into the region’s banks in order to stave off a credit crunch.

Antonio Borges said a broad injection of capital to all major European banks as opposed to a country-by-country solution would help restore investor confidence.

The EU has pumped 420 billion euros to banks since the 2008 financial crisis but Borges argues that the current issue is not about the real strength of banks but about the perception that investors have in them.
He stressed that this loss of confidence could lead to a freeze in bank lending which could snowball into slowed manufacturing and business confidence.

Over in Greece protesters have led a 24 hour general strike in resistance to the government’s newest austerity measures.

Over 13-thousand protesters gathered in Athens for demonstrations organized by the country’s two main labor unions and the Communist Party.