Banks downgrade threat remains despite ECB funds: S&P

Reuters ^ | Dec 23, 2011 | Marc Jones

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(Reuters) - The half a trillion euros the European Central Bank pumped into the financial system buys hard-hit banks valuable time but will not in itself protect them from threatened rating downgrades, one of Standard and Poor's top executives said.

The ratings firm put almost the entire euro zone and some of its biggest banks, including Deutsche Bank, BNP Paribas, Societe Generale and UniCredit, on a downgrade warning this month.

In a telephone interview with Reuters on Friday, S&P's Managing Director of its Financial Institutions division, Scott Bugie, said this week's unprecedented injection of three-year loans by the ECB was a positive step.

But it would not solve the banks' key problem of carrying too much debt.

"The move in itself will not lead to any improvement in (banks') credit ratings," Bugie said.

"The operation is a big deal. It's half a trillion euros of three-year money at an ultra-low rate. It is not solving the fundamental issues though... It's kicking the can a long way down the road rather than just a little bit but in the end it is still kicking the big old can down the road."