Fitch Puts Ratings on Italian, Spanish, and French Banks on Watch Negative

On Tuesday, Fitch Ratings put eight Spanish and seven Italian banks on rating watch negative, and revised outlook on four French banks to negative. Fitch Ratings cites this action is because " pressure on the banks' earnings, funding, liquidity, asset quality and capitalisation is likely to increase further in the increasingly difficult operating environment and strained financial markets. There is a link between sovereign and bank creditworthiness in any country, which strengthens as sovereign ratings weaken." To resolve the ratings watch negative, Fitch said it would "concentrate on the banks' ability to maintain adequate capitalisation in an increasingly more challenging operating environment, particularly in the light of expected further asset quality deterioration in an adverse economic environment and further valuation declines in their government bond portfolios." There was little action in most asset classes, as the EUR/USD pair and U.S. equities barely moved.