Moody’s Investors Services said that it has downgraded the long-term issuer and debt ratings of 23 Italian sub-sovereign entities, including regional and local governments (RLGs) as well as two associated entities.
The credit ratings agency (CRA) said that downgrades were prompted by the weakening of the Italian government’s credit profile and that the outlooks on Italian sub-sovereign ratings remain negative in line with the outlook on the sovereign rating.
Moody’s added that the centralised architecture of Italy’s local public sector establishes close operational and financial linkages between the national and peripheral governments. Although this is well-established and designed to ensure the stability of the RLG finances, the institutional framework does not grant RLGs sufficient autonomy to withstand a deterioration of the sovereign rating.
RLGs are contributing to Italy’s fiscal consolidation through fiscal tightening measures imposed by the central government. Lower state resources and stricter budgetary restraints are, in turn, resulting in increased budgetary rigidity and worsened budgetary performance.
At the same time, Moody’s has also downgraded by one to two notches the long-term debt and deposit ratings for 10, and the issuer ratings for three Italian financial institutions; again following the weakening of the government’s credit profile.
The banks affected by the downgrades are UniCredit and its subsidiary, UniCredit Leasing; Intesa Sanpaolo; Banca CR Firenze (Carifirenze); Banca IMI; Banca Monte Parma; Banca Nazionale del Lavoro; Cassa di Risparmio di Parma e Piacenza (Cariparma); Banca Popolare Friuladria (Friuladria); Banca Carige; Credito Emiliano; GE Capital SpA; Cassa Depositi e Prestiti and Istituto Servizi Mercato Agricolo Alimentare (ISMEA).
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