Slovenia’s credit rating was cut to junk by Moody’s Investors Service, which cited “turmoil” in the country’s banking industry and said the government would have to offer lenders more financial support.
The rating was lowered two levels to Ba1 from Baa2, on par with Turkey, Moody’s said today, assigning a negative outlook. Five members of the 17-nation euro area are now rated junk by Moody’s. Standard & Poor’s and Fitch Ratings both rate Slovenia at A-, the fourth-lowest investment grade.
“The first key factor underpinning today’s rating action is the ongoing turmoil in the country’s banking system and the high likelihood that the sovereign will be required to provide further assistance and capital injections,” Moody’s said in an e-mailed statement from New York. “Asset quality at the banks deteriorated considerably in 2012 and has continued to deteriorate since.”
Slovenia, which before the rating action was on course to sell dollar-denominated benchmark bonds, is struggling with its second recession since 2009. The government is working to fix its ailing banking industry with a 900 million-euro ($1.2 billion) capital boost and the creation of a so-called bad bank to cleanse lenders’ balance sheets and aid economic recovery. A detailed overhaul plan is set to be presented to the European Commission in Brussels by May 9.
Bond-market history indicates that the utility of sovereign ratings may be limited. Almost half the time, yields on government bonds fall when a rating action by S&P and Moody’s suggests they should climb, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back as far as the 1970s.
The yield on the government’s dollar note due 2022 rose two basis points to 5.66 percent at 6:55 p.m. in Ljubljana.
Banking, previously the only public industry which when making bad decisions was allowed to charge the losses to the taxpayers. Think of this for a moment. The bankers have two buckets, their deposit bucket and their speculative investment bucket. (Note the term speculation. Not a guarantee.) It used to be that such funds were to be kept separate, so that if the banks speculations failed, the depositors would receive their money back, but the speculators (From the fund manager, to the VP to the CEO) would rightfully lose their shirts!
But not the new banking model. No, here if you make deposits, those are forfeit upon bankster request. and if that's not enough, you as a private citizen are compelled to invest in these hair-brained ventures via a specialized investment vehicle called taxes.
So to recap I've made this handy dandy payment model which outlines some of your obligations and rewards:
- Special access to discount rates at Central Bank: Banksters
- Leverage ratios in excess of 100:1: Banksters (But you had better adhere to that 36% DTI ratio buddy!)
- Large dividends on SIV investments: Banksters
- Mark-to-model asset evaluation: Banksters
- Large corporate bonuses: Banksters
- Deposit forfeiture during "restructuring": Depositor
- Large penalties due to instant bank account leverage (Overdraft): Depositor
- Insurance obligation via "restructuring" banks: Taxpayer
- Complimentary bankster cup complete with corporate logo: All yours baby!
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