Moody's drops outlook for German banks

The rating agency Moody's announced late Wednesday that it was putting a negative outlook on the credit ratings of 17 German banks, mostly state-level public institutions. The change in outlook from stable to negative indicates that the agency is considering a downgrade of the banks' credit ratings if adverse conditions persist.
The outlook change followed Moody's decision on Monday to put negative outlooks on the Aaa-rated bonds of Germany, the Netherlands and Luxembourg. The agency made an identical change in outlook earlier Wednesday for the eurozone's rescue fund, and also took a pessimistic outlook on six German states, including the key industrial regions of Baden Wuerttemberg, Bavaria and North Rhine Westphalia. The agency justified the moves on Germany, the Netherlands and Luxembourg by citing the "increasing likelihood" of rescues for Spain and Italy, as well as the risk of budget and economic impacts if Greece departs the eurozone.