Moody's Lowers Rating Outlook On 82 EU Banks

(RTTNews) - Moody's Investors Service lowered the rating outlook on 82 European banks to 'negative' as a new rule to reduce the risk of taxpayers in case of bank failure could make stakeholders more vulnerable to losses.

At the same time, the rating agency affirmed long-term ratings of 109 European financial institutions and upgraded one. It downgraded the outlook to 'stable' from 'positive' on two long-term ratings.

Downgrading the outlook, Moody's said with the legislation underlying the new resolution framework and the explicit inclusion of burden-sharing with unsecured creditors, the balance of risk for banks' senior unsecured creditors has shifted to the downside.

The Bank Recovery and Resolution Directive and Single Resolution Mechanism steps were taken by the EU with an intention to reduce the risk that bank-related contingent liabilities will crystallize on EU government in a future banking sector stress scenario.

"While Moody's support assessments are unchanged for now, the probability has risen that they will be revised downwards to reflect the new framework," the agency said.