(The following statement was released by the rating agency)
July 25 - Standard & Poor’s Ratings Services has reviewed the banking system of the Republic of Ireland (BBB+/Negative/A-2) under our updated Banking Industry Country Risk Assessment (BICRA) methodology. We continue to rank Ireland in BICRA group ‘7’, along with countries such as Hungary, Iceland, Indonesia, Portugal, and Russia. We define Ireland’s peers as the U.K. (group ‘3’), Spain (group ‘5’), Portugal (group ‘7’), Iceland (group ‘7’), and Latvia (group ‘8’). For the full report, see “Banking Industry Country Risk Assessment: Ireland,” published today on RatingsDirect on the Global Credit Portal.
The BICRA comprises two main areas of analysis--economic and industry risk--where Ireland still scores ‘7’ in both.
Our economic risk score of ‘7’ for Ireland is based on an “intermediate” assessment of “economic resilience” (defined in our criteria as the underlying stability of an economy to absorb adverse economic developments) and a “very high risk” assessment of “economic imbalances” and “credit risk in the economy,” as our criteria define these terms.
Standard & Poor’s considers that Irish banks benefit from operating in a flexible, open economy that remains supported by favorable foreign direct investment flows. High levels of public and private debt continue to strain medium-term growth prospects, however, and the open nature of the economy means that there is significant vulnerability to external demand in Europe, the U.K., and the U.S. We consider political risk to be low in a global context, but view the government’s fiscal flexibility as highly constrained.
Our industry risk score of ‘7’ is based on our opinion that the Irish banking system faces “high risk” from its “institutional framework,” “intermediate risk” in its “competitive dynamics,” and “very high risk” in “systemwide funding,” as our criteria define these terms.
We classify the Irish government as “supportive” toward its banking system. We recognize the government’s significant track record of providing capital support to the banking sector in times of economic duress.
-- Ireland’s New Personal Insolvency Regime Keeps Mortgage Risk To The Fore, July 3, 2012
-- Ireland’s ‘BBB+/A-2’ Ratings Affirmed; Off Watch Neg; Outlook Negative, Jan. 13, 2012
-- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
-- Bank Capital Methodology And Assumptions, Dec. 6, 2010
-- Sovereign Government Rating Methodology And Assumptions, June 30, 2011
-- Criteria For Determining Transfer And Convertibility Assessments, May 18, 2009
-- Understanding Standard & Poor’s Rating Definitions, June 3, 2009
-- Rating Government-Related Entities: Methodology And Assumptions, Dec. 9, 2010
-- Analytical Linkages Between Sovereign And Bank Ratings, Dec. 6, 2011