OREANDA-NEWS. Fitch Ratings says in a new report that 60 banks' Long-term Issuer Default Ratings (IDRs) globally were downgraded in 2Q15, which vastly exceeded the 12 upgrades in the quarter. Almost four-fifths of the downgrades were in Europe, predominately resulting from Fitch's revisions to sovereign support assumptions. The downgrades reflected Fitch's view that sovereign support can no longer be relied upon for most US, EU, Swiss and Hong Kong banks.

Over 80% of developed market banks' Long-term IDRs are now driven by their Viability Rating (VR), reflecting their standalone strength. In emerging markets VRs still drive less than 60% of Long-term IDRs.

The headline number of downgrades in the quarter masks to a certain extent the strengthening of banks' standalone strength. Just over 30 banks' VRs were upgraded in 2Q15 compared with 17 downgrades. While the strengthened VRs did not fully offset reduced support expectations, it limited the effect.

Following the revision to the Support Rating Floors, combined with strengthened VRs, the proportion of bank ratings globally on Negative Outlook fell significantly to just below 15% from almost 25% at end-March 2015. For the first time since 2007, over 80% of developed market banks' ratings were on Stable Outlook.

Uncommonly, sovereign rating actions had limited impact on bank ratings in 2Q15. However, four Greek banks were downgraded in the quarter to 'Restricted Default' from 'B-'/Rating Watch Negative. This followed two downgrades of the sovereign rating and ultimately the imposition of capital controls.