Moody’s lowered its outlook for 17 institutions from "stable" to "negative" late wednesday evening – a logical consequence of the worsening outlook for the federal government and six german states.
The decision may be a first step to a credit downgrade. A lower rating can make it harder and more expensive to raise fresh money. Lenders face higher likelihood of losing money.
The main banks affected are the landesbanken, such as LBBW (baden- wurttemberg), bayernlb and HSH nordbank (hamburg/schleswig-holstein). But forderbank k, which is owned by the federal government and the federal states, the savings bank fund service provider dekabank and IKB in dusseldorf, which was rescued with billions in taxpayers’ money and government guarantees, also have to reckon with poorer ratings. Moody’s still rates the creditworthiness of all these institutions with the two best grades, "aaa" and "aa1," respectively, thanks to state backing.
After moody’s had cast doubt on the top ratings of germany, the netherlands and luxembourg on monday, on tuesday it was the turn of individual federal states, state-owned companies such as deutsche bahn and later the euro bailout fund EFSF to take their turn. Their outlook is now also "negative.
If the valuation of a state changes, the ratings that depend on it – for example, those of state-owned companies and state-owned banks – must also be examined. If the rating agencies come to a new decision, they must notify the issuers concerned – i.E. Federal states and companies – twelve hours before publication.
The current wave of bad news from moody’s is due to uncertainty about the course of the debt crisis in europe with its hotspots greece, spain and italy. The rating agency fears that economically strong countries like germany will have to shoulder further burdens and could ultimately take on the task of rescuing the euro partners.
If moody’s actually decides to downgrade germany, this will set off another chain reaction. The step is by no means a foregone conclusion. Also the competitor standard& poor’s (S&P) had questioned the federal republic’s top credit rating a few months ago, but ultimately left the "AAA" untouched.
Moody’s had received some sharp criticism from politicians for lowering the outlook. Lower credit ratings could complicate efforts to resolve the debt crisis.