Moody's downgrades Irish banks to junk

Moody's downgrades Irish banks to junk

The credit ratings of all Ireland’s major banks have been downgraded to junk status by Moody’s after its decision to cut the country’s sovereign rating earlier this month.

Moody?s also downgraded bank debt guaranteed by the Irish state. Anglo Irish Bank, Allied, bank of ireland, EBS and Irish Life have all used the scheme to issue bonds under the government?s Eligible Securities Scheme.  

By Harry Wilson 1:12PM BST 18 Apr 2011

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Allied Irish Banks, Bank of Ireland, EBS Building Society and Irish Life & Permanent had their long-term bank deposit ratings cut by two notches by Moody’s, while ICS Building Society was downgraded one notch.

Moody’s also downgraded bank debt guaranteed by the Irish state. Anglo Irish Bank, Allied, Bank of Ireland, EBS and Irish Life have all used the scheme to issue bonds under the government’s Eligible Securities Scheme.

Explaining its reasons for classifying all Irish bank debt as junk, Moody’s said it was a result of “the reduction in the level of systemic support embedded in our deposit ratings”, as well as the “removal of systemic support from the unguaranteed senior unsecured debt”.

The possibility of further downgrades has not been ruled out as Moody’s has maintained a “negative” outlook on Irish sovereign debt, which if cut again would likely lead to a cut in the banks’ ratings.

Ireland’s banks were told this month that they would need to raise a further €24bn (£21bn) to bolster their capital levels after a series of stress tests on the country’s largest lenders.

Much of the country’s banking system has been nationalised, with troubled lenders such as Anglo and EBS owned entirely by the state. A restructuring process is currently underway, which will lead to the merger of many of the institutions into new banks that it is hoped could be privatised in time.

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