Moody's cuts ratings for 13 Italian banks

Moody's cut its rating for 13 Italian banks Monday, citing the weakened borrower standing of the Italian government after its credit grade was lowered last week. The ratings fell by one to two notches, with Unicredit and Intesa Sanpaolo both falling to Baa2 from A3. "Today's actions follow the weakening of the Italian government's credit profile," Moody's said in a statement. "Along with the increase in the risk of sovereign bond defaults, the downgrade of Italy's long-term ratings to Baa2 also indicates a similarly increased risk that the government might be unable to provide financial support to its banks in financial distress." Moody's said that banks are normally rated no higher than a government "due to multiple channels of shared exposure and contagion." Italian banks, it said, have substantial exposure to the domestic economy and "high direct exposure" to sovereign debt. Last Thursday Moody's cut the Italian government's rating two steps to Baa2 from A3, saying that Italy was now "more likely to experience a further sharp increase in its funding costs or the loss of market access" for borrowing to service its budget deficit.