Ratings agency Standard and Poor's has lowered its long-term credit ratings for AIB and Bank of Ireland.
For AIB its lowered its long-term rating from A+ to A due to credit risks and pressures on earnings. S&P says the downgrade reflects its anticipation of continued significant weakening of asset quality, and that it expects this to continue exerting pressure on profitability.
After this week's recapitalisation plan S&P says it believes the Government will continue to provide support to AIB if it needs it.
Bank of Ireland's long-term rating has been lowered to A From A+. The agency says this reflects its consideration of BoI's strategy and prospects for the bank's asset quality, earnings, and capitalisation, as well as the Government's announcement of an expanded support package.
On Morning Ireland today, Paul de Grauwe, Professor of Economics at the University of Leuven, said the rating agencies were being unfair to Ireland. He said that these agencies previously gave almost everybody good ratings, and underestimated risks, but were now going to the other extreme, seeing risk everywhere.
Asked about Irish banks, Professor de Grauwe said there was a feeling in Europe that the recapitalisation of AIB and Bank of Ireland may not be enough and nationalisation may be needed eventually.
