Italian Costs Rise After DBRS Rating Cut

Italian borrowing costs rose in early trade on Monday after DBRS cut Italy’s credit rating, warning that the country’s government has not taken a “systemic approach” to its banking crisis.

DBRS cut Italy’s sovereign credit rating to BBB (high) from A (low) after market close on Friday in a move that will mean Italy’s banks must pay more to borrow money from the European Central Bank when they use the country’s bonds as collateral.

Speaking to CNBC later Monday, Fergus McCormick, Co-Head of Sovereign Ratings and Chief Economist at DBRS said the move was a long term view and the discomfort began to grow in August last year.

“Unlike Ireland and unlike Spain, Italy has not taken a systemic approach to solving its problem,” McCormick told CNBC.

McCormick added that Italy’s banking sector was a victim of low economic growth as well as political uncertainty and therefore it was hard to see if the Italian banking system is at its lowest point.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza