Fitch Ratings on Thursday dropped Ireland’s credit rating from A+ to BBB+, citing the costs of the banking system restructure and support, as well as ongoing contingent liabilities. On Wednesday, Anglo Irish Bank (ANGIB.UL) and Irish Nationwide Building Society (IRNBS.UL) announced they will submit a joint restructuring plan to the European Commission (EC).
According to a Reuters report, Fitch released a statement saying, “The scale and pace of the deterioration of public finances, continuing contingent fiscal and macro-financial risks emanating from the banking sector means that Ireland's sovereign credit profile is no longer consistent with a high investment grade rating.”
The restructuring of AIB and INBS was the result of a demand made by the International Monetary Fund (IMF), the EC, and the European Central Bank (ECB) as a condition for Ireland’s bailout. The plan must be completed by the end of March, and will call for the two institutions to be merged and run down over time. One portion of the plan will specify how the deposits from AIB (14 billion euros) and from INBS (4 billion euros) will be transferred to other banks within the system. Loans will be reduced over several years.