MOODY’S HAS downgraded its rating for Anglo Irish Bank to reflect the “serious challenges” faced by the bank. The international ratings agency also warned it may downgrade the senior debt ratings of other Irish banks.

In a statement issued on Thursday night, Moody’s said it was cutting its rating of Anglo’s senior debt from A2 to A3 because of the bank’s significant “capital erosion”.

“Furthermore, Moody’s believes that significant restructuring will be necessary for the bank to develop a viable business model again,” the agency said.

This rating action follows the release of the bank’s results for the half-year to the end of March in which it recorded a loss of €4.1 billion due to a greatly increased provisioning charge. Although the Government has announced it intends to inject up to €4 billion into Anglo, Moody’s expects the capitalisation of the bank is likely to remain very weak without further State support.

The agency also placed the long-term deposit and senior debt ratings of AIB, Bank of Ireland, Irish Life & Permanent (I&LP) and ICS Building Society on review for possible downgrade. It also downgraded or placed on review for downgrade various junior debt securities of AIB, Anglo, Bank of Ireland, EBS and ILP.

Yesterday, Moody’s withdrew Barclays Bank Ireland’s deposit and financial strength ratings.