Fitch Upgrades 3 Irish Banks' Short-term IDRs to 'F1+'
Fitch Upgrades 3 Irish Banks' Short-term IDRs to 'F1+' on Government Guarantee Ratings
30 Sep 2008 12:55 PM (EDT)
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Fitch Ratings-London-30 September 2008: Fitch Ratings has today upgraded the Short-term Issuer Default ratings (IDRs) of Anglo Irish Bank Corporation to 'F1+' from 'F1', EBS Building Society to 'F1+' from 'F1' and Irish Nationwide Building Society to 'F1+' from 'F2'. The Short-term IDRs of Allied Irish Banks and Bank of Ireland are affirmed at 'F1+'.
The rating action follows the announcement today by the Irish Government that it is providing a guarantee for all deposits, covered bonds, senior debt and dated subordinated debt (lower Tier II) at Allied Irish Banks, Anglo Irish Bank Corporation Bank of Ireland, EBS Building Society, Irish Nationwide Building Society and Irish Life and Permanent. The guarantee covers all new and existing facilities listed above until 28 September 2010.
Fitch considers this general action to be the most proactive taken by any European government to maintain financial stability for the benefit of depositors and investors in the current market uncertainty. Other European initiatives in recent days have been specific in nature, protecting individual institutions and excluding subordinated debt (for example in the case of Bradford & Bingley). The guarantee does not extend to undated subordinated (upper Tier II) or preference shares. The institutions will pay the government a charge for the guarantee.
The action taken by the Irish government is similar to that taken by the Swedish government in the early 1990s when they introduced guarantees for creditors and depositors, and acquired two failing banks. The Swedish government acted quickly and decisively to restore investor confidence - a move which is repeated today by the Irish government. Given the positive effect that this initiative initially appears to have had on investor confidence in the Irish banking system, Fitch believes other European countries could follow suit. Fitch does not believe European state aid will be an issue, given that the alternative to provision of such a guarantee by the Irish government could have much more serious ramifications for the wider economy.
Contact: Matthew Taylor, Fitch Ratings, London
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