ECB bank check unlikely to affect sovereign ratings: S&P

LONDON Thu Feb 6, 2014 12:13pm EST

A pigeon flies next to the construction site of the new European Central Bank (ECB) headquarters in Frankfurt, December 3, 2013. REUTERS/Kai Pfaffenbach

A pigeon flies next to the construction site of the new European Central Bank (ECB) headquarters in Frankfurt, December 3, 2013.

Credit: Reuters/Kai Pfaffenbach

LONDON (Reuters) - The European Central Bank's health check of euro zone banks later this year is not expected to lead to any changes in sovereign credit ratings, Standard and Poor's said on Thursday.

The ECB is looking over the books of the euro zone's 128 biggest banks to find any weaknesses before it takes over as the bloc's overarching banking supervisor.

How it will fill any holes it finds is uncertain. But S&P's top European sovereign analyst, Moritz Kraemer, said it should not cost so much that it affects the credit rating of the governments that pick up some of the bills.

"We have in the euro area a much more balanced view than we had a year ago," Kraemer said, "We only have negative outlooks on three countries: Belgium, Italy and Portugal, and positive outlooks on two: Ireland and Latvia."

"In none of those have we made an explicit reference to this (ECB assessment)... so currently we do not expect that this would be a trigger for any rating changes."

Kraemer was speaking on a webcast alongside Stefan Best, one of S&P's top bank analysts. Best said the process, and the issue of how much responsibility governments would take for their banks, would be crucial for bank ratings, but "it's difficult to predict the rating implications at the moment."

Both men said the health of peripheral euro zone banks and debt-strained governments remained deeply intertwined because of the huge amounts of sovereign bonds banks owned.

They also predicted the ECB would continue to provide cheap financing to banks once it had finished its check-up in October.

(Reporting by Marc Jones; Editing by Larry King)

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Comments (1)
breezinthru wrote:
Though the European Central Bank’s health check of euro zone banks is not expected to lead to any changes in sovereign credit ratings, the converse should be true.

I assert that it is not proper to weigh the risk of bank-held Eurozone sovereign debt at zero.

Feb 10, 2014 1:19am EST  --  Report as abuse
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