Four banks downgraded by leading ratings agency
Anglo Irish Bank, Bank of Ireland, AIB and IL&P have all been downgraded by Canada's largest ratings agency on the back of a weakening of the government's position.
The four banks mainly issue debt with a government guarantee, but the Toronto-based agency has also downgraded Ireland one notch to AA as its starts to cover the Irish economy full time.
All four had their long-term ratings lowered to AA from AA (high). The decision impacts upon the banks' deposits and long-term debt issues, but not their short deposits or short-term debt. The agency said the ratings were now stable, meaning a further downgrade is not expected in the short term.
Yesterday the agency published a note on Ireland as well, praising recent actions by the Government. Awarding the country an AA rating, the agency said: "The AA rating reflects Ireland's structural strengths -- an open economy, highly skilled workforce, flexible labour market and strong political institutions."
Ireland had come up with an "exemplary policy response", said the agency.
"However the stable trends could be changed to negative if the planned austerity measures for the 2011 budget are not fully implemented,'' said the agency.
Meanwhile, the Irish banks are bracing themselves for this Friday's announcement of European stress test results.
European regulators plan to detail three scenarios when they publish the results, according to a document by the Committee of European Banking Supervisors (CEBS).
Banks will publish their estimated Tier 1 capital ratios under a benchmark for 2011, an adverse scenario and a third test that includes "sovereign shock", according to CEBS.
In the last scenario, banks will publish their estimated losses on sovereign debt held in their trading book as well as "additional impairment losses on the banking book" that they may suffer after a sovereign debt crisis, according to a document dated July 15.
Meanwhile, M&T Bank, in which AIB has a major stake, said it had second-quarter earnings of $1.53 a share, beating analysts' expectations.