Standard & Poor’s Ratings Services on Friday cut the ratings for 15 Italian banks, citing a potentially deeper and more prolonged recession in Italy than originally anticipated.
The ratings firm said the downgrading reflected “our view of increased credit risk for the Italian economy and its banks.”
The agency revised the economic risk score for Italy, one of the main components of its Banking Industry Country Risk Assessment, to five from four.
“With Italy facing a potentially deeper and more prolonged recession that we had originally anticipated, we are of the view that the vulnerability of Italian banks to the impact of rising loan losses has increased due to the combined effect of mounting problem assets and reduced coverage of loan loss reserves,” S&P said in a statement.
The firm now thought a severe recession likely would increase Italian banks’ problem assets in 2012 and 2013 to levels higher than previously anticipated, and higher than other banks in Europe.
Banks like Unione di Banche Italiane, Banca Popolare dell’ Emilia Romagna and Banca Popolare di Vicenza saw their ratings downgraded.
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