S&P downgrades ratings on 34 Italian banks

Standard and Poor’s has lowered the credit rating of 34 Italian banks in a move that follows the agency’s two-notch downgrade of Italy on January 13.

Italy’s biggest financial institutions, including UniCredit, Intesa Sanpaolo, Banca Nazionale del Lavoro and Mediobanca, were hit.

In January, S&P downgraded Italy’s credit rating by two notches to BBB+ from A.

Since coming to power in November, Prime Minister Mario Monti has pushed through a harsh austerity plan and has asked for European assistance in helping to drive down borrowing costs for Italy on the debt markets.

The efforts have helped bring Italy’s 10-year borrowing rate closer to 6 per cent after hovering around seven per cent late last year, a level largely understood to be unsustainable.

With sky-high public debt and an economy headed into a recession, Italy faces a daunting challenge this year as it needs to raise around €450 billion on the markets at higher than usual rates.

AAP