New York, August 3 (FinanceEnquiry.com) – Analysts at Moody’s Investors Service has downgraded Slovenia Government’s bond rating from A2 to Baa3. The outlook on the ratings has been negative.
In a research note published yesterday, the analysts state that the major reason behind the downgrade of the ratings has been the country’s challenged banking system and the consequently increased likelihood of further contingent liabilities crystallizing for the sovereign.
Mainly, the banking system might face increases in non performing loans on its books. The second major reason was government’s rising cost of funding and its increasingly constrained financial market access. Due to the increasingly adverse market conditions, the government had to shift the composition of its funding mix towards a greater reliance on shorter term issuance and loans, rather than the typical issuance pattern of meeting most of its borrowing requirements through bond placements.
Another reason behind the downgrade was the economy’s continued weakness and its limited resilience to shocks, which were exacerbating the government’s weakening financial strength and debt metrics. However, the negative outlook indicates that the sovereign’s funding challenges and risks from the financial system continues to be substantial, the analysts say.
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