Fitch Ratings on Wednesday downgraded the debt ratings for five major European commercial banks and cooperative banking groups, citing the eurozone crisis and stronger headwinds facing the banking sector.
The ratings firm lowered the long-term issuer-default and viability ratings by one notch for French banks Banque Federative du Credit Mutuel and Credit Agricole, Danish lender Danske Bank, and Finland’s OP Pohjola Group and The Netherlands’ Rabobank Group.
The move follows a review by Fitch of large European banks.
Fitch said the downgrades of Danske Bank and Credit Agricole reflect their subsidiaries’ exposure to troubled eurozone countries.
The firm said that the eurozone crisis also was also hurting other lenders indirectly. Capital markets are not functioning effectively and the crisis is driving economic slowdown.
Uncertainty over how the eurozone crisis will be resolved, in addition to austerity measures being taken by some European governments, will affect commercial banking negatively, particularly in southern Europe and Ireland, Fitch said.
European banks are under mounting pressure. The German government announced on Wednesday it was reactivating its financial-sector rescue fund. And the European Banking Authority said last week that the continent’s banks need to raise about 115 billion euros (US$149.44 billion) to protect lenders against market turmoil, including bad government debt.
Concerns that governments are less likely to come to the rescue of financial institutions prompted Fitch to downgrade its outlook and ratings for Britain’s Royal Bank of Scotland Group PLC, Lloyds Banking Group and Swiss lender UBS AG in October.