Moody′s downgrades German, Austrian banks | Business| Economy and finance news from a German perspective | DW | 06.06.2012
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Moody's downgrades German, Austrian banks

Ratings agency Moody's has lowered the credit ratings of Commerzbank and eight other banking groups in Germany and Austria fearing adverse effects from a deepening debt crisis. Action was delayed on Deutsche Bank.

Germany's second largest bank, Commerzbank, will see its creditworthiness cut by one notch to A3 from A2, Moody's Investor Service announced Wednesday, adding that it assigned the bank a "negative" outlook.

The same downgrade was announced for the German regional bank NordLB and German lenders LBBW, Deka Bank, DZ Bank and Helaba, although they were able to maintain a "stable" outlook.

In addition, Moody's cut the credit ratings of Austria's three largest banks: Erste Group Bank by two notches, down to A1 from A3, UniCredit Bank Austria, cut by one notch to A2, and Raiffeisen Bank, now assigned A1.

Moody's carried out a broad review of financial institutions in the two countries and came to the conclusion that the banks were facing "increased risk of further shocks emanating from the eurozone debt crisis, in combination with the banks' limited loss-absorption capacity."

Asset deterioration

The downgrades are relatively mild compared to huge cuts in credit ratings recently announced by Moody's and other international ratings agencies for financial institutions in debt-stricken southern Europe.

Noting that the economies in Germany and Austria enjoyed "relative strength," Moody's added that lenders in the two countries would face risks if the debt crisis deepened and the global economy slowed down more than expected.

Austria's central bank urged the country's lenders last week to improve their balance sheets, arguing they were "undercapitalized" compared with other international banks.

Germany's flagship banking group Deutsche Bank wasn't included in the report, Moody's said, as Europe's biggest bank was subject to a different review of global firms with large capital markets operations.

This review had started in mid-May and would be concluded by the end of this month, the agency added.

uhe/rg (Reuters, dpa, AFP)