From Banking Day:
Any inference that there may be less explicit government support for banks in a crisis may warrant a cut in the long-term credit rating of five banks, Standard & Poor’s believes.
In a report on “Australia’s Developing Crisis-Management Framework”, S&P pointed to a “hypothetical rating impact” should the “government’s willingness to support banks” be lowered to “supportive”, under S&P’s assessment, from “highly supportive”.
The scenario arises in the context of what S&P calls “contingency plans for domestic, systemically important financial institutions in Australia.”
This appears to be a reference to some of ARPA’s planned “bail in” provisions that would see some creditors have to wait to be paid, which is, of course, entirely appropriate. If a downgrade is the price of giving the market back some risk then so be it.
