Fitch Ratings downgraded five major European commercial banks and cooperative banking groups on Wednesday, after it conducted a review of big banks in the region. The ongoing debt crisis in Europe, as well as problems facing the banking sector, were the reasons it gave for its decision.
Fitch said that, although the five lenders have improved their capital and liquidity positions—a positive factor that helped keep their viability ratings from falling more than a single notch—capital markets are not functioning efficiently and the debt crisis is contributing to an economic slowdown, The Washington Post reported.
As a result, the long-term issuer-default and viability ratings were cut by one notch for French banks Banque Fédérative du Crédit Mutuel and Crédit Agricole, Denmark’s Danske Bank, the Finnish OP Pohjola Group and Rabobank Group of the Netherlands.
Fitch also dropped the long-term issuer default ratings for Banque Fédérative du Crédit Mutuel, Credit Agricole and OP Pohjola Group to A+ from AA-, cut Danske Bank to A from A+, and Rabobank Group to AA from AA+.
The rating agency noted that other banks have been harmed indirectly by the crisis, and that commercial banking, particularly in Ireland and southern Europe, will feel the negative effects of both uncertainty over the handling of the crisis and the austerity measures being enforced by several European governments.
In a statement, Fitch said: “The general developments in the global economy and a notable shift in market confidence towards the banking sector as a whole outweigh the positives and have been the primary drivers of today’s downgrades.”