Banks play down cost of downgrade
S&P cuts rating of SA’s financial institutions but analysts say costs to be passed on to borrowers
Most of the banking sector does not expect S&P Global Ratings’s decision on Thursday to downgrade ratings at SA’s leading banks to significantly affect their cost of funding or disrupt operations, even as analysts warned that funding costs would increase markedly and that these costs would be passed on to consumers over time. The ratings agency has brought the counterparty credit ratings of FirstRand Bank, Nedbank, and Investec Bank in line with government’s foreign-currency rating of BB+, the first rung in the non-investment grade basket. They all had a negative outlook.k. S&P does not rate Standard Bank or Capitec Bank. "[The ratings] reflect that of the sovereign and indicate that we could lower the ratings further if we lower our foreign-currency ratings on SA," said S&P analysts. Counterparty credit ratings measure the probability of default on banks’ counterparty obligations, such as funding commitments, letters of credit, secured transactions and other obligations arising fro...
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