S&P: Irish banks on watch

Standard & Poor's said the BB/B counterparty credit ratings on Allied Irish Banks plc remain on CreditWatch with negative implications as do the BB-/B ratings on its wholly owned U.K. subsidiary AIB Group UK plc. The BB+/B ratings of Bank of Ireland remain on CreditWatch with negative implications.

As a result of the planned restructuring of Irish Life & Permanent plc, which will lead to the disposal of its life operations, S&P lowered the ratings to BB+/B from BBB-/A-3. This reflects the view that there will likely be no material support by Irish Life Assurance plc (BBB-/developing watch). The ratings on Irish Life remain on CreditWatch with negative implications.

S&P also lowered Irish Life's lower tier 2 subordinated debt rating to CCC from B given the government's stated intention to include subordinated debtors in the recapitalization of Irish banks and the long-term counterparty credit rating on Anglo Irish Bank Corp. to CCC+ from B-, reflecting Anglo's reduced importance to the Irish government.

S&P removed Anglo's ratings from CreditWatch with negative implications. The outlook is negative.

The rating actions follow S&P's review of the results of the Irish government's financial measures program, comprising a prudential capital assessment and a prudential liquidity assessment as well as the announced restructuring of the Irish banking sector and the revised ratings on Ireland (BBB+/stable/A-2).

The financial measures program and bank restructuring announcement represent a credible first step by the Irish government toward the eventual rebuilding of investor confidence in the deeply troubled Irish banking system, the agency said.

The ratings consider the assumptions underlying the stress testing of capitalization are robust and have contributed to a stable outlook on the Irish sovereign ratings, the very large planned capital injections and the announced deleveraging and restructuring, which appear to be both practical and plausible measures, the agency said.

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