Rating agency Moody’s Investors Service late on Monday slashed the ratings of 13 Italian banks, citing the weakened credit profile of the Italian government.
The downgrades came only four days after the rating agency cut Italy’s government bond rating to Baa2 from A3, with a negative outlook, reported Xinhua.
The ratings declined by one notch for seven of the affected institutions, and by two notches for the remaining six. The short-term ratings for three of the banks were also downgraded by one notch, triggered by the long-term ratings changes.
“Along with the increase in the risk of sovereign bond defaults, the downgrade of Italy’s long-term ratings to Baa2 also indicates a similarly increased risk that the government might be unable to provide financial support to its banks in financial distress,” Moody’s said in its statement.
Italian banks had previously been downgraded in mid May.
Moody’s said Italian banks had a substantial exposure to the domestic economy and “high direct exposure” to sovereign debt.