S&P downgrades three Austrian banks in response to new bail-in rules

FRANKFURT Wed Aug 13, 2014 1:37pm EDT

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FRANKFURT Aug 13 (Reuters) - Ratings agency Standard & Poor's has downgraded three systemically important Austrian banks - Raiffeisen Zentralbank Oesterreich, Erste Group and Unicredit Bank Austria - in response to new bail-in legislation.

"In our view, the new law indicates reduced predictability of extraordinary government support for systemically important banks, and for banks' hybrid capital instruments and grandfathered debt, than we previously envisaged," S&P said in a statement on Wednesday.

"The negative outlooks on three banks reflect our view that the likelihood of state support could diminish further, as well as bank and industry-specific factors," S&P added.

S&P lowered the long and short-term counterparty credit ratings of Erste Group Bank to A-/A-2, from A/A-1, and of Raiffeisen Zentralbank Oesterreich to A-/A-2 from A/A-1.

S&P also lowered the long-term counterparty credit rating on UniCredit Bank Austria to BBB+ from A-, while affirming the A-2 short-term rating.

The outlook on all three banks is negative, S&P said. (Reporting by Edward Taylor; Editing by David Goodman)