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Banks downgrade doesn't scare investors

Thursday, June 21, 2012 - 02:22

June 22 - European banking stocks rose on Friday, despite the previous day's downgrade of the credit ratings of 15 of the world's biggest banks by Moody's. Analysts say the cuts were anticipated, but the pressure is on for European leaders to end the euro zone crisis. Joanna Partridge reports.

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European stocks fell slightly on Friday morning as investors reacted to ongoing economic concerns and Moody's downgrade of 15 of the world's biggest banks. They lowered credit ratings by one to three notches - reflecting the risk of losses they face. Robert Halver is a Frankfurt trader. SOUNDBITE: TRADER WITH BAADER BANK, ROBERT HALVER, SAYING (English): "The banking crisis in Europe has reached the same level as last year. That's why we need quick solutions to fix the problem." Several European banks were downgraded by two notches by Moody's - including Barclays, BNP Paribas, Credit Agricole, and Deutsche Bank. Whereas HSBC, Royal Bank of Scotland and Societe Generale were cut by one notch. Switzerland's Credit Suisse was the biggest surprise - its rating was cut by three notches. But it comes just days after it was warned about weak capital levels by the Swiss central bank. The long-term cuts could increase funding costs for the lenders. European banking stocks rose on Friday morning. That's because the markets had been anticipating the downgrade since February, when Moody's said it was reviewing 17 banks, says Will Hedden from IG Index. SOUNDBITE: Will Hedden, Sales trader, IG Index, saying (English): "We've already seen RBS coming out and saying well they don't agree with this, this is backward-looking and not forward-looking and we're in a much better position than we were in the past." U.S. lenders were also downgraded - and Citigroup criticised what it called the "disproportionately adverse treatment of U.S. firms" compared with European banks. That's not necessarily fair says Chris Wheeler from Mediabanca. SOUNDBITE: Chris Wheeler, Bank analyst, Mediabanca, saying (English): "The two reasons for this universal banking groups being downgraded was obviously the weak capital markets and also of course exposure to the euro zone in general." Moody's cuts come as independent auditors said struggling Spanish banks may need up to 62 billion euros in extra capital, which will mostly be filled by a euro zone bailout. European authorities have recently criticised the power of the ratings agencies to move markets. But it's clear investors' main concerns are the fact the economy is slowing in China and the U.S., when Europe's debt crisis still hasn't been resolved. And this should only increase pressure on European leaders to take action. Joanna Partridge, Reuters

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Banks downgrade doesn't scare investors

Thursday, June 21, 2012 - 02:22