At the same time, the banking group’s long-term viability assessment dropped from “B” to “F” because “in Fitch’s opinion, Dexia would have defaulted [on its current debt] if it had not benefited from state support,” the agency said Tuesday evening.
The negative evaluation does not apply to Dexia’s Luxembourg-based operations, including BIL and joint-venture RBC Dexia Investor Services, as Fitch believes the Luxembourg government would support them if needed.
Fitch’s two main competitors have taken similar steps in recent days. Last Friday, Dexia’s credit rating was downgraded by Standard & Poor’s one notch to “A-2” due to the “challenges accessing funding and the need for more collateral.”
On Monday, Moody’s warned it was reviewing a potential downgrade of Dexia Bank Belgium, its French public finance unit Dexia Credit Local and Luxembourg-based Dexia BIL, driven by “concerns about further deterioration in the liquidity position of the group in light of the worsening funding conditions in the wider market.” It also warned it was considering a downgrade of Belgian sovereign debt, following Monday’s announcement that Belgium was participating in a bailout of Dexia.
Moody’s--as well as Fitch--does not expect to downgrade the credit ratings of France and Luxembourg, the other two countries behind the Dexia rescue plan.
Fitch ratings run from AAA at the highest to D at the lowest end of the scale.
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