The European Union (EU) has lost its top AAA credit rating from Standard & Poor’s (S&P), which cited the deteriorating creditworthiness of the bloc’s 28 member nations for its downgrade to AA+.
The downgrade came after the credit ratings agency last month applied a similar downgrade to the Netherlands.
S&P maintained a stable outlook and a short-term rating of A-1+ for the EU.
In its accompanying commentary S&P said that downward pressure could build if the creditworthiness of highly-rated EU countries “was to deteriorate beyond our current expectations,” if future budget negotiations are “more protracted and acrimonious,” if member states apply to leave the EU, “or if its financial parameters markedly deteriorate”.
A lack of cohesion and solidarity among EU member states, particularly regarding the budget process, posed a credit risk, S&P added. “EU budgetary negotiations have become more contentious, signaling what we consider to be rising risks to the support of the EU from some member states.”
The EU countries that make the biggest contributions to the bloc’s budget have lobbied for reductions in their shares, while the UK government has said that it will hold a referendum in 2017 on whether to remain a member of the bloc.
This is “the first time in the EU’s history that a sitting government has proposed such a step,” S&P said. “Although this potential plebiscite is set for 2017, the UK general elections are expected in 2015 and we expect EU membership to be a key debate.”
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.
The top five sectors Asian fintech investors are interested in are data analytics, blockchain, lending, payments and regtech, according to Gary Hwa, EY regional managing partner.
On the third day of the Singapore Fintech Festival conference, there was a focus on specific applications of fintech innovation. One was trade finance, which is clearly is ripe for a revolution.
Kicking off day two of the Singapore Fintech Festival, Deloitte Chairman David Cruikshank said that fintech is significant for three reasons. First, customer expectations of services are higher than ever. Second, barriers to entry are lower than before. And finally, financial institutions (FIs) face a threat of what a competitor might do.