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Moody’s warns of possible downgrade of Polish rating

PR dla Zagranicy
Roberto Galea 26.01.2016 13:53
One of the world’s big-three rating agencies, Moody’s, has warned that it could downgrade Poland’s rating, following a similar move by Standard & Poor’s earlier this month.
foto: sxc.hufoto: sxc.hu

Moody’s has said that the government’s planned banking tax as well as the Swiss-franc-mortgage conversion programme – both outlined in the electoral campaign of the governing Law and Justice (PiS) party – will take a toll on the profitability of the country’s banks.

“Such a decline in net income would reduce banks’ ability to absorb shocks,” the Financial Times quoted Moody’s as saying in a report.

“If the conversion were to be enforced on unfavourable terms for banks, burdening them with substantial financial costs, that would threaten the stability of the banking sector. The tax also threatens to hurt credit growth because it reduces banks’ capital creation, which risks adversely affecting Poland’s economy and resulting in slower GDP growth,” the report continued.

The news on Tuesday saw the yield of 10-year Polish bonds rocket to 3.331 at the time of writing, an increase of 14.35 percent over the last ten days.

A similar rise in bond yield was seen following the S&P downgrade from A- to BBB+ on January 15.

“The downgrade reflects our view that Poland’s system of institutional checks and balances has been eroded significantly as the independence and effectiveness of key institutions, such as the constitutional court and public broadcasting, is being weakened by various legislative measures initiated since the October 2015 election,” Standard & Poor’s said in a statement. (rg/pk)

tags: banks, PiS
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