Anglo Irish Bank hit by junk rating blow
Published 27/11/2010 | 05:00
ANGLO Irish was hit with a huge blow yesterday when its credit rating was reduced to 'junk' status, meaning that swathes of corporate depositors will no longer be able to do business with the bank.
The treasury departments of major corporations are normally not allowed to leave deposits with junk rated banks, leaving Anglo heavily reliant on retail depositors and the European Central Bank (ECB).
Standard & Poor's (S&P) lowered Anglo's credit rating by six notches leaving it with one of the weakest credit ratings in European banking.
The US agency said the Irish Government may have to reconsider its support for the bank.
The agency also lowered by one notch the credit ratings of Bank of Ireland to BBB+, with AIB and Irish Life and Permanent dropping to BBB.
S&P said bonds of Anglo Irish were at risk of taking 'haircuts' or discounts under the €85bn package being put together this weekend by the IMF/EU.
"In our opinion, the standalone creditworthiness of the four domestically owned Irish banks has weakened," S&P said.
"We believe that the Irish Government may be forced to reconsider its current supportive stance toward Anglo's unguaranteed debt."
S&P noted the downgrades "follow a turbulent period for the Irish banking system, which in our view has led to the fortunes of the Irish sovereign becoming increasingly intertwined with those of its banking system."
Fitch Ratings meanwhile downgraded AIB and Bank of Ireland's lower tier 2 (LT2) subordinated debt.
For Bank of Ireland, the agency said that Irish government ownership might increase from its current level of 36pc, but would probably not reach 100pc.