Nearly a fifth of Eurozone firms downgraded in 2012 amid crisis

Ben Southwood
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NEARLY a fifth of the euro area’s non-financial firms and almost a third of its financial companies were downgraded by Standard & Poor’s (S&P) in 2012, the ratings agency revealed yesterday.

During a year in which nine rated European firms defaulted, costing creditors $19.7bn (£13bn), 29 per cent of firms inside the financial sector and 18 per cent outside suffered a blow to their rating, the ratings giant said.

Only four per cent of finance businesses were upgraded. The fraction of ratings left unchanged declined from 64.8 per cent in 2011 to 62.7 per cent last year.

“The weaker credit profiles of some sovereigns, as well as the economic and financial challenges that Europe is facing, contributed to the increase in downgrade activity among banks and insurance companies,” said S&P global fixed income research head Diane Vazza.

And S&P figures suggested these downgrades were justified, as the so-called Gini ratio – which measures how closely ratings correspond to credit risk – was 93.8 per cent in 2012.