Moody's downgrades debt ratings on Irish banks

Moody’s downgraded its ratings on the long-term senior unsecured debt securities of the six Irish financial institutions covered by the Government’s bank guarantee to Aa1 with a negative outlook, from Aaa, it said today in a statement.

The ratings agency said the move followed the downgrading of Irish Government bonds to Aa1 with a negative outlook last week.

Moody’s placed the long-term unsecured debt at the six Irish financial institutions guaranteed by the State on review for a possible downgrade in April.

Long-term senior unsecured debt is a type of funding provided to the banks and building societies.

In its statement today Moody’s said the ability of the Government to provide ongoing financial support to the banks covered by its guarantee “has weakened over the past few months”, although it said this remains “robust”.

Part of the reason for this was due to the provision of €3.5 billion each to recapitalise Bank of Ireland and AIB and the provision of €3 billion to help Anglo Irish meet its loans.

Anglo may require up to €4.5 billion more if its loan book continues to deteriorate.

The impact of a “marginally weaker expected ability of the Irish government to support its banks - has hence resulted in a moderate weakening of the long-term creditworthiness of these banks,” Moody’s analysts said.

Moody’s said its ratings also reflect the expected transfer of development loans and certain investment property loans from banks to the National Asset Management Agency (NAMA), in a move which was likely to “reduce the risk profile of the two banks”.