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Moody’s downgrades 11 Brazilian banks ratings which could be exposed to a debt crisis

Thursday, June 28th 2012 - 21:39 UTC
Full article 4 comments
President Rousseff has promoted the policy of stimulating borrowing to stoke the economy President Rousseff has promoted the policy of stimulating borrowing to stoke the economy

US rating agency Moody's had downgraded the ratings of 11 Brazilian banks by one to three notches, almost all of them to the level of Brazil's sovereign credit rating.

The rating agency revised all banks with ratings higher than the sovereign credit rating. “Our review indicated that there are little, if any, reasons to believe that these banks would be insulated from a government debt crisis,” Moody's said in a press release.

Banco do Brasil SA, Banco Safra, Banco Santander (Brasil), HSBC Bank Brasil – Banco Multiplo SA HSBAR.UL, Banco Bradesco, Banco Itau and Banco Itau Unibanco SA are among the affected.

Currently Brazil has a sovereign rating at an investment grade Baa2, according to Moody’s. Meanwhile Banco Votorantim SA was downgraded to one notch below this level because of the bank's poor financial performance.

Moody’s decision reflects a looming credit crisis in Brazil as the amount of “bad loans” in the country’s banking hit a decade high in May, while the amount of loans provided grew 18% to 1.03 trillion Reis compared to last year.

Brazilian President Dilma Rousseff has been promoting the policy of stimulating borrowing in order to stoke the economy as her predecessor Lula da Silva did during the 2009 crisis.

The approach has been effective as Brazil’s growth in 2010 peaked at 7.5%. But last year it fell to 2.7% and this year, according to private estimates it is set to grow less than 2% due to the global slowdown and lack of investment, while a a large share of debts puts additional pressure on Brazilian households.

Moody’s has already downgraded dozens of financial institution in Europe as a part of the global banking review. Moody’s Investors Service said it had downgraded the ratings of 11 Brazilian financial institutions in line with its review of global banks.

Categories: Economy, Politics, Brazil.

Top Comments

Disclaimer & comment rules
  • reality check

    Oh dear, seems that downgrading banks is not a phenonemon restricted to Europe. Know that is really going to fuck up some of our posters here!!!

    Jun 28th, 2012 - 10:47 pm 0
  • ChrisR

    But completely expected.

    You cannot do what Dilma has insisted the banks do (provide loans to vitually anyone with a pulse) without the REAL RISK OF MASSIVE DEFAULT!

    Brasil still does not have effective debt control laws for the banks to use when pursuing debtors who have defaulted.

    Crazy, crazy situation.

    Mr. Market will come back and bite them on this one big-time.

    Jun 29th, 2012 - 03:07 pm 0
  • British_Kirchnerist

    #2 Losing faith in Dilma Chris?

    Jun 29th, 2012 - 04:05 pm 0
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