S&P lowers outlook on US financials following sovereign move

Standard & Poor's yesterday lowered its outlook on several government-related entities in the financial sector, following its similar revision of outlook for the US sovereign earlier this week.

While retaining their AAA status, S&P has revised its rating outlook to negative for financial institutions including Fannie Mae, Freddie Mac, the federal home loan bank system, and the farm credit system banks. S&P has also revised its outlook to negative from stable for ten of the 12 individual federal home loan banks while affirming their AAA long-term counterparty credit ratings. The outlooks on the federal home loan banks in Chicago and Seattle were not affected, nor were the ratings on the individual farm credit banks.

Ratings for government-related entities are tightly linked to those of the supporting sovereign and will not raise above it, while they are likely to follow the same direction as any rating downgrade on the sovereign rating.