CORRECTED-UPDATE 1-Ratings agency DBRS on hold on Spanish rating
(Corrects paragraph 2 to show that DBRS rates Spain at A(low), not A)
By Paul Day
MADRID, Sept 19 (Reuters) - Credit ratings agency DBRS is odds on to keep Spain's rating on hold at its next review early next year but the risks for the country are on the downside and its outlook will likely remain negative, the agency's top sovereign analyst said on Thursday.
The ECB uses the highest debt rating of four agencies in determining the amount of collateral national banks must put down to borrow. DBRS rates Spain at A(low), equivalent to Standard & Poor's A-.
This is above Fitch, Standard & Poor's and Moody's ratings on the country and a one-notch downgrade would bring an automatic penalty from the central bank, meaning Spain's lenders would get 8 billion euros ($10.7 billion) less in funds for every 100 billion of government bonds offered up as guarantee.
"Everything is on the table. I would say the most probable outcome during the coming revue in December, which will then be published in February or March, would be a continuation of the rating and the negative trend (outlook)," said DBRS official Fergus McCormick told reporters.
"Our concerns which could change this are medium term and, barring shocks, the indicators we expect in the coming months won't change our position."
Spanish banks borrowed some 249.3 billion euros from the ECB in August, down from a high of over 411 billion euros in August 2012.
Spain economic output shrank less rapidly than expected in the second quarter, prompting the government to call the end of a two-year recession in the second half of the year.
Poor domestic demand, however, remains a heavy drag on growth.
"Spain is still mired in a very deep recession," McCormick said. "I still think there's room for growth. When will it return to growth? It's unclear. At what rate? Very, very unclear."
Since a decade-long property bubble burst in Spain in 2008, the economy has stagnated and public debt as a percentage of gross domestic product has almost tripled on multi-billion euro bank bailouts and rising social security costs.
The government expects public debt, which currently stands at over 90 percent, to stabilise within three years and any setbacks in economic recovery that lead to a deviation from this would threaten DBRS' rating, McCormick said.
"The first repercussion (of a return of the economic crisis) is a delay in the stabilisation of debt-to-GDP. That's a major concern for us and it's why the negative trend (outlook) is still on and I suspect it will be on for a long time," he said. ($1 = 0.7492 euros) (Reporting by Paul Day; Editing by Patrick Graham)
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