The banks that were downgraded last night include US banks Bank of America and Goldman Sachs, Barclays and France’s BNP Paribas. Switzerland’s Credit Suisse and Germany’s Deutsche Bank were also cut. The downgrade could raise the cost of borrowing for these banks.
Fitch cut the “issuer default ratings” at the banks to “reflect challenges faced by the sector as a whole”. The ratings agency said: “These challenges result from both economic developments as well as a myriad of regulatory changes”.
Credit ratings of the world’s biggest lenders have come under pressure as weak economic growth and concerns about whether European politicians have done enough to end the Eurozone debt crisis.
Long-term issuer default ratings for Bank of America, Citigroup and Goldman Sachs were cut to A from A+. Barclays, Deutsche Bank and Credit Suisse were downgraded to A from AA- while BNP Paribas fell to A+ from AA-.
Meanwhile, Germany’s attempt to save the Eurozone was hanging in the balance as Hungary and the Czech Republic claimed it would be damaging and protesters in Warsaw demanded Poland stands firm against Angela Merkel.
Amid fresh warnings that Europe is triggering a 1930s-style global depression, the German chancellor faced open rebellion against the key plank of her Brussels accord. The leaders of Hungary and the Czech Republic told a joint conference in Budapest they were ready to reject the planned treaty changes
and implied move towards a centralised tax system. Czech prime minister Petr Necas said he was “convinced that tax harmonisation would not mean anything good for us”.
Hungarian prime minister Viktor Orban said that central Europe had the potential to become the most competitive region in Europe.
“The only kind of co-operation we can have with the eurozone is one which does not damage Hungary’s competitiveness,” he said.
Poles marched under banners that read: “We want sovereignty, not the euro.” They were protesting against the Brussels deal that could see EU countries, including those outside the eurozone, face penalties for breaking tough centralised spending laws. Britain used its veto in Brussels, sparking an intense backlash. Ireland and Sweden are also nervous about the fiscal pact, but Germany and France still expect the other 26 members, minus the UK, to approve it.
Mario Draghi, the head of the European Central Bank (ECB), doused the other big hope, for radical ECB support, warning that the bond-buying programme was “neither eternal nor infinite”. He said there was little he could do to restore growth. “I will never be tired of saying that the first response ought to emanate from the country. There is no external saviour for a country that doesn’t want to save itself … sustainable growth can be achieved only by undertaking deep structural reforms that have been procrastinated [upon] for too long.”
Separately, Christine Lagarde, head of the International Monetary Fund (IMF), said the debt crisis is not yet over: “No country or region is immune. All must take action to boost growth. Work must start in the eurozone countries and must continue relentlessly. The risks of inaction include protectionism, isolation and other elements reminiscent of the 1930s depression.”
However, markets took comfort from a successful Spanish bond auction and better-than-expected economic data. The Stoxx Europe 600 index and the German Dax both gained 1pc, while the French CAC rose 0.8pc. In London the FTSE closed up 0.6pc. Madrid sold €6bn (£5bn) of debt at an average yield of 4.02pc, lower than the 5.276pc of two weeks ago.