So late to the party: S&P downgrades Ireland again citing the capital needs for the banks

S&P lowers long-term ratings on Ireland to 'A-' from 'A' and its short-term ratings to 'A-2' from 'A-1'. They  remain CreditWatch negative.

This is how what was once a bank problem becomes a national problem as bank liabilities are tranferred into the sovereign, waiting for the coming sovereign defaults.  Via S&P:
"The downgrade follows Standard & Poor's revision of the Irish Banking Industry Country Risk Assessment (BICRA) to Group '6' from '4'," Standard & Poor's sovereign credit analyst Frank Gill said.

The ratings remain on CreditWatch, reflecting our view of the uncertainties surrounding the size of Ireland's additional capital needs for its largely state-owned financial sector.

"We estimate the external indebtedness of Ireland's domestic banking groups (excluding the international financial services sector) at over 170% of GDP; Irish domestic banks currently depend almost entirely on the ECB to refinance expiring market debt," Mr. Gill said. "Were the labor market to deteriorate further, a rise in the level of delinquencies in the domestic banks' mortgage books could result in higher new capital requirements than we presently assume. The emergence of a European sovereign debt restructuring framework that could reduce the perceived adverse political and financial cost of a sovereign debt restructuring could also lead us to reconsider our view of Ireland's creditworthiness. However, we expect that the resolution of this CreditWatch listing will likely leave the government's ratings in an investment-grade category."


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