S&P cuts Chinese financial institutions

S&P said it lowered the ratings on Agricultural Development Bank of China (ADBC), China Development Bank Corp. (CDB) and Export-Import Bank of China (China EXIM), following the agency’s downgrade of China.

“We see these three policy banks as government-related entities with an almost certain likelihood of receiving extraordinary support from the Chinese government if the banks are under stress. Therefore, we equate the ratings on ADBC, CDB, and China EXIM with the sovereign credit ratings on China,” the agency said in a news release.

As a result, S&P also downgraded the rated subsidiaries of CDB, issue supported by the standby letters of credit from CDB, and the loan participation note that EXIM China supports.

The lowered sovereign rating reduced the space of uplift for extraordinary government support that had been factored into the agency’s ratings on China International Capital Corp. Ltd. and indirectly China International Capital Corp. (Hong Kong) Ltd.

As a result, the agency lowered the long-term issuer rating on both entities and their outstanding guaranteed debt by one notch.

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