Eighty-seven banks from EU countries risk seeing their subordinated debt downgraded by theMoody's rating agency. The US agency fears that governments are too cash-strapped to bail out riskier bank debt holders in times of stress.
The institutions most at risk are those of Spain, Italy, Austria and France. The review could lead to a potential average downgrade of subordinated debt by two notches and junior subordinated debt and Tier 3 debt by one notch.
Moody's points out that there have been recent examples where subordinated debt holders have been imposed losses without significant contagion to other debt classes, “consequently, there should be very clear reasons why Moody's would consider maintaining a supportive assumption in the ratings on subordinated debt".
The countries involved in the review are Austria (nine banks), Belgium (three), Cyprus (two), Finland (three), France (seven), Italy (17), Luxembourg (three), the Netherlands (six), Norway ( five), Poland (one), Portugal (two), Slovenia (two), Spain (21), Sweden (four) and Switzerland (two).
