Outlook 'negative' for Polish banks and Sicilian region
by Dean Carroll
15 November 2011
Rating agency Moody's added to Europe's financial woes today by setting out a "negative outlook" for Poland's banking system and the autonomous Italian region of Sicily. The assessment of the Polish banking system was changed from stable to negative because of the rating agency's expectation that the "operating environment will deteriorate", as credit conditions worsen over the next 12 to 18 months.
Weaker economic growth in Poland will trigger asset deterioration and limit banks' ability to expand their lending, negatively impact revenues – according to Moody's. A spokesman for the agency said: "While Poland is more insulated from the turbulence in the euro area than some of its smaller neighbours, it is not immune to external shocks. Moody's, therefore, expects that weaker growth in the major western European countries - Poland's principal trading partners – as well as fiscal consolidation and restrained bank lending will suppress the pace of economic expansion in Poland and affect banking system performance."
Meanwhile, following a recent downgrade as a result of Italy's sovereign action, Sicily is now rated one notch below Italy's rating with a "negative outlook". A spokesman for the rating agency said: "Although Sicily is less exposed to state-induced revenue dynamics due to its special statute prerogatives, the overall flat tax revenue trend and its rigid operating expenditure profile have resulted in traditionally tight operating performances, which are expected to come under further pressure due to the reduction in state funds associated with Italy's fiscal consolidation efforts.
"On the capital side of the budget, central government and European Union funds remain the main drivers of the region's investments. However, delays in state funding have led to growing borrowing requirements in 2010-11 and a slight increase in the region's debt exposure. As a result, Sicily's net direct and indirect debt grew to €4.9 billion in 2010, a 15 per cent increase from levels recorded in 2009."
Weaker economic growth in Poland will trigger asset deterioration and limit banks' ability to expand their lending, negatively impact revenues – according to Moody's. A spokesman for the agency said: "While Poland is more insulated from the turbulence in the euro area than some of its smaller neighbours, it is not immune to external shocks. Moody's, therefore, expects that weaker growth in the major western European countries - Poland's principal trading partners – as well as fiscal consolidation and restrained bank lending will suppress the pace of economic expansion in Poland and affect banking system performance."
Meanwhile, following a recent downgrade as a result of Italy's sovereign action, Sicily is now rated one notch below Italy's rating with a "negative outlook". A spokesman for the rating agency said: "Although Sicily is less exposed to state-induced revenue dynamics due to its special statute prerogatives, the overall flat tax revenue trend and its rigid operating expenditure profile have resulted in traditionally tight operating performances, which are expected to come under further pressure due to the reduction in state funds associated with Italy's fiscal consolidation efforts.
"On the capital side of the budget, central government and European Union funds remain the main drivers of the region's investments. However, delays in state funding have led to growing borrowing requirements in 2010-11 and a slight increase in the region's debt exposure. As a result, Sicily's net direct and indirect debt grew to €4.9 billion in 2010, a 15 per cent increase from levels recorded in 2009."
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