European Bank Credit Ratings Cut by S&P

I have spoken to a few large companies about the recent downgrades to bank credit ratings and ultimately what it will mean to various supply chain finance programs they have.

Besides impacting the cost of funding in the capital markets, Banks still fund vendors such as Orbian, Receivables Exchange, PrimeRevenue, and others. Does this impact programs with them? Probably not, but we don’t know for sure.

So who got whacked the hardest? Deutsche Bank, the same bank whose co chairs were ousted and replaced by a risk and audit guy, was downgraded two notches. UniCredit Bank AG was also cut two levels to triple-B. Together with Royal Bank of Scotland (majority government owned by the way) and Commerzbank, they stand at BBB+, three notches ahead of junk status. Nice.

Standard & Poor’s Ratings Services opinions and tracking are still held to be reliable by Regulators for both Banks and Investors. Basically what the cut by the rating agencies said was we are not sure of the support you will receive from your own governments.

Even since the Great Recession of 2008, where many banks have increased their capital buffers as a result of Basel III, it is worth noting how close some banks are to non investment grade rating.

Between zero interest rates and many other anomalies we have been living with, these are sure interesting times.

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