Tuesday, January 13, 2009

Santander cannot be as rock solid as is led to believe.

S&P threatens to strip Spain of top AAA rating

The move caused fury in Madrid and revived fears in the currency and bond markets about the underlying health of Europe's monetary union. Spanish officials are irked that S&P has placed Spain's debt on "CreditWatch Negative", a notch lower than the "outlook" alert issued on Irish bonds last week. It is the first time that a AAA country has suffered such a harsh verdict since the start of the global financial crisis. S&P? Does anyone still actually listen to a word they say?

Posted by flintster1994 @ 04:38 PM (823 views)
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5 thoughts on “Santander cannot be as rock solid as is led to believe.

  • flintster,

    I would have thought the FX traders and the bond market dealers were sophisticated enough to ignore S&P ratings. However these are the same muppets who happily bought up subprime mortgage-backed bonds.

    More importantly their ratings have legal weight.

    Under the Basel II agreements, banks can use credit ratings from certain approved “External Credit Assessment Institutions” when calculating their net capital reserve requirements. The approved list includes S&P, Moody’s, and Fitch.

    If S&P cuts Spain’s rating then a lot of banks might be forced to sell their bonds, pushing interest rates up for Spain. Interesting indeed.

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  • Very interesting post flintster.
    I have a feeling that Spain is the Achilles Heel of the Eurozone. The bright star whose economy surged after joining and is politically a staunch supporter of the euro. Although my understanding from Spaniards I have met is that the people blame their woes on the euro.
    Probably every effort will be made to stop this flagship from sinking. If she goes down this could spell disaster for the the eurozone.I just wonder who will be the sacrificial lambs as the money runs out!

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  • A little off topic but I just recieved a note today from both the AKBank and Anglo Irish Banks saying that they are no longer in the UK FSCS, they are now only to be covered up thier countries schemes.
    Does any one know if all the other European banks doing the same?

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