Fitch Ratings surprised financial markets by downgrading Spain two notches to double-A-minus, citing an intensifying crisis in the eurozone and the expectation of growth of less than 2 per cent through 2015; Italy's cut, by one step to single-A-plus, was less of a shock.
Late Friday, in an indication of how the crisis risks spreading to other eurozone economies, Moody's Investors Service also placed Belgium's Aa1 rating under review for a possible downgrade, indicating concern over the government's high debts. After the government stepped in this week to guarantee the debts of Franco-Belgian bank Dexia SA, Moody's also cited the likelihood that the government would have to step in to provide additional support to banks.
An EBA spokesman, Romain Sadet, said the agency hadn't received any formal instructions from the EU to take another look at the banks. Moody's said European banks needed to reduce their reliance on wholesale funding. Banks in the euro area depend on average for almost half of their funding from often-skittish wholesale markets, whereas US banks on average have close to 70 per cent funding provided by more stable retail depositors.
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