December 21, 2016 / 10:52 AM / 2 years ago

DBRS to decide on Jan. 13 whether to cut Italy's debt ratings

MILAN, Dec 21 (Reuters) - DBRS plans to take a decision on Jan. 13 on whether to cut its long-term rating on Italy’s debt, a spokesman for the rating agency said, in a move that would raise the cost of borrowing central bank funds for the country’s struggling lenders.

The Canadian agency said in early November it had postponed its decision on Italy until after a Dec. 4 referendum on constitutional reform. Italians rejected the constitutional changes, prompting Matteo Renzi to step down and Paolo Gentiloni to take over as prime minister.

The DBRS rating for Italy is the highest among those assigned by the major four credit agencies the European Central Bank uses to decide the discount applied to government bonds posted as collateral by lenders in refinancing operations.

If Italy lost its only remaining single ‘A’ rating, the ECB would have to increase the discount on bonds used as collateral, which would increase borrowing costs for Italian banks. (Reporting by Giulio Piovaccari, writing by Valentina Za, editing by Steve Scherer)

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