(The following was released by the rating agency)
Overview
-- On Oct. 30, 2012, Standard Poor's Ratings Services
lowered to 'B-' from 'B' its unsolicited long-term sovereign
credit rating on the Republic of Argentina.
-- We are taking a similar rating action on four Argentine
banks.
-- The outlook on the ratings remains negative.
Rating Action
On Nov. 1, 2012, Standard Poor's Ratings Services lowered
to 'B-' from 'B' its global scale issuer credit ratings on Banco
Hipotecario S.A., Banco Patagonia S.A., Banco de Galicia y
Buenos Aires S.A., and Banco de la Provincia de Buenos Aires.
The outlook on the ratings remains negative.
Rationale
The downgrade on the Republic of Argentina is based on the
increasing risks the government will face on its debt management
following the Second Circuit Court of Appeals of the United
States' ruling ratifying the judgment of the New York district
court granting summary judgment to plaintiffs on their claims
for breach of the Equal Treatment Provision. This rule could
potentially increase the liabilities of Argentina and the debt
service of the government over the near term. In addition,
recent negative events, such as the payment in local currency of
a province liability denominated in U.S. dollars issued under
Argentinean Law and the blocking of a Navy ship in Ghana by
litigants from the 2001 sovereign default, highlight the
increasing risks the government of Argentina will continue to
face to define its economic policy management and financial
program over the near term.
We rarely rate financial institutions above the foreign
currency ratings on the countries where they operate because we
consider it unlikely that these institutions would remain
unaffected by developments in their domestic economy. Also, all
the financial institutions operating in Argentina could face
indirect effects of a sovereign downgrade. This is because we
believe a sovereign downgrade is normally associated with, or
could lead to, a weaker operating environment for financial
institutions, which would very likely affect their
creditworthiness. These trends could harm the credit
fundamentals of these four banks. We will continue to monitor
their financial condition closely.
Outlook
The negative outlook indicates at least a one-in-three
chance of a downgrade over the next 12 months. Increasing risks
on external debt payments derived from the consequences of legal
actions against Argentina in international courts, a worsening
external position, mostly likely from financial outflows, or
additional policy actions that exacerbate political polarization
and further diminish Argentina's growth prospects could lead to
a downgrade. On the other hand, the ratings could stabilize if
the government takes actions that restore investor confidence on
medium-term prospects for the economy (on the monetary or
structural front), and thus reduce uncertainty over its external
liquidity position. A revision to stable on the sovereign
outlook will trigger a similar rating action on the country's
banks.
Related Criteria And Research
-- Unsolicited Ratings On Argentina Lowered To 'B-' On
Increasing Risks To Policymaking; Outlook Is Negative, Oct. 30,
2012
Ratings List
Downgraded To From
Banco Hipotecario S.A.
Issuer credit rating B-/Negative/-- B/Negative/--
Banco Patagonia S.A.
Issuer credit rating B-/Negative/-- B/Negative/--
Banco Galicia y Buenos Aires S.A.
Issuer credit rating B-/Negative/-- B/Negative/--
Banco de la Provincia de Buenos Aires S.A.
Issuer credit rating B-/Negative/-- B/Negative/--