Fitch cuts ratings on European banks (AP)

LONDON – Concerns that governments are less likely to come to the rescue of financial institutions prompted Fitch credit ratings agency to downgrade its outlook for Britain's Royal Bank of Scotland Group PLC, Lloyds Banking Group and Swiss lender UBS AG on Thursday.

Fitch also said it is reviewing the ratings of a host of European lenders, citing ongoing exposure to sovereign-debt in peripheral Europe and sluggish economic growth prospects. The costs of additional bank regulation and political pressure to reduce state support for banks continue to pose challenges to lenders, Fitch said.

Fitch is the second major credit rating agency in less than a week to slash its ratings of Royal Bank of Scotland and Lloyds. Last week, Moody's cut its ratings on the two U.K. banks for the same reason.

"The banking system is not only very large relative to the U.K. economy, but there is also more advanced political will to reduce the implicit support for the country's banks," Fitch said in a statement explaining its downgrade of the British lenders.

It lowered its long-term ratings for the two large bailed-out banks by two notches to A from AA-.

The credit rating agency dropped Swiss lender UBS one notch to A from A+ and Germany's Landesbank one notch to A+ from AA-.

The moves follow similar actions taken against Italian lenders

Fitch also put Barclays on notice for a possible downgrade, but the British arms of HSBC PLC and Spain's Banco Santander SA were unaffected.

France's BNP Paribas and Societe Generale were also put on negative ratings watches, along with Credit Suisse, Deutsche Bank and Rabobank.

U.S.-based Morgan Stanley and Goldman Sachs rounded out the banks put on negative ratings watch.

Fitch said it expects to make a decision on possible ratings downgrades "within a short time frame and take corresponding rating actions where warranted."

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European bank bill well over $133.8 billion: Ireland (Reuters)

DUBLIN (Reuters) – There is general agreement that European banks will need fresh capital well in excess of 100 billion euros ($133.8 billion) and it will likely come from a variety of sources, including the euro zone rescue fund, Ireland's finance minister said on Saturday.

Germany and France are split ahead of key talks on Sunday over how to strengthen shaky European banks. Paris is keen to tap the euro zone's 400 billion rescue fund, the EFSF, to recapitalize its own banks and Berlin is insisting the fund should be used as a last resort.

The International Monetary Fund (IMF) has said European banks need 200 billion euros in additional funds.

"I think there is general agreement that it will be significantly in excess of 100 billion (euros)," Michael Noonan told reporters on the sidelines of an economic forum in Dublin.

"I know that some of the big German banks that I was talking to personally intend raising money on the market so it will be private funding. Other banks would like to avail of the EFSF fund. Other banks will rely on their sovereign governments to provide the capital so there is going to be a range of ways of doing it."

"I think the principle should be that sovereign governments are responsible for their banking system on the advice of the European Central Bank."

"If banks can't capitalize themselves, either by issuing equity to the market or by getting exchequer funds then obviously they would have the option of requesting EFSF funding. When we recapitalized our banks here we went the EFSF option."

Noonan said recent credit rating downgrades of Spain and Italy reflected frustration at Europe's failure to solve a long-running sovereign debt crisis.

"There is certainly an impatience that Europe should resolve the problems of the euro zone and do it pretty quickly," he said.

Ireland's banks were at the heart of its financial crisis and subsequent EU-IMF bailout and earlier this year Dublin put a 70 billion euros bill on recapitalizing its lenders.

Noonan is currently looking at ways to try and restructure nearly 31 billion euros worth of promissory notes, a form of IOU, used to recapitalize shuttered lenders Anglo Irish Bank and Irish Nationwide Building Society.

The notes carry an interest bill of 17 billion euros, spread out over 20 years and Noonan would like to tap the EFSF to pay off the remaining amount outstanding, nearly 44 billion euros, and then repay that money to the EFSF over a longer timeframe and at a lower interest rate.

"We are moving on it with colleagues in Europe and they have given no commitment but they are prepared to proceed on the basis of joint policy papers, which we have just commenced to draft now."

"I want to position ourselves in a changing European situation so that Ireland's interests are studied carefully and taken into account in any wider solution that goes forward in the next month."

(Reporting by Carmel Crimmins; Editing by Alison Birrane)

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European stocks rise ahead of U.S. jobs data (Reuters)

LONDON (Reuters) – European stocks rose on Friday and the euro clung to gains from a 2-cent rally after euro zone policymakers moved to shore up struggling banks and fend off a financial crisis, while markets positioned for U.S. employment data due later.

The European Central Bank (ECB) announced aggressive liquidity measures on Thursday, throwing a lifeline to lenders whose wholesale funding has dried up as market confidence ebbed, and the European Union said it would present a plan for a coordinated recapitalization of banks by member states.

Gold, oil, copper and equities were all on course to post weekly gains on hopes that Europe's leaders may finally be getting to grips with a two-year-old sovereign debt crisis, although the scale of the task meant caution remained high.

"European stock indexes as well as shares in a number of sectors such as banking, insurance, oil, utilities and telecoms seem to be stabilizing," Cholet Dupont strategist Vincent Guenzi said.

"This stabilization may be a sign of a strong rebound to come if we get significant progress in the resolution of the euro zone debt crisis."

Fears that the European crisis is heading inexorably toward a default by Greece -- and possibly others -- that could trigger turmoil in the banking system have caused a sharp sell-off in riskier assets since late July.

The FTSEurofirst 300 (.FTEU3) index of top European shares was up 0.5 percent at 945.63 points.

Royal Bank of Scotland (RBS.L) and Lloyds Banking Group (LLOY.L) fell 3.5 and 4 percent respectively after Moody's Investors Service downgraded the credit ratings of the two banks.

S&P 500 index futures were steady, indicating some caution ahead of the non-farm payrolls report due at 1330 GMT, always closely watched for clues on the state of the U.S. economy.

RETURN OF RISK

In a further boost to euro zone market sentiment, European Commission President Manuel Barroso said the EU's executive arm was proposing coordinated action to cleanse banks of toxic assets.

The euro, which has fallen back from a 2011 peak near $1.50 in May, was up slightly around $1.3457, after jumping from a low of $1.3240 on Thursday.

Many market players put the euros rally down to short-covering -- when traders buy back into a currency to realize gains on an earlier bet it would fall -- and believe the shared currency's downtrend remains intact.

"Some of the euro/dollar shorts have been squeezed as the market seems to be taken the positive aspects from the ECB measures and hopes of recapitalization of European banks," said Paul Robson, currency strategist at RBS Global Banking.

"Going into the U.S. jobs data, a very weak number could see the euro drop while a consensus to marginally weak number could help."

German Bund futures rose after a sharp sell-off in the previous session, as investors looked to U.S. jobs data for fresh insight into the health of the world's largest economy.

While some investors were disappointed the ECB did not also cut interest rates, riskier assets such as equities, commodities and currencies linked to commodity markets, such as the Australian dollar, rallied.

Gold rose 0.6 percent to around $1,659 an ounce, on course for its first week of gains after four straight weeks of declines that saw it shift from a negative to a positive correlation with riskier assets as investors seeking safety turned instead to U.S. Treasuries and the dollar.

Brent crude eased slightly to $105.33 a barrel and U.S. crude was little changed at $82.62, on course for its biggest weekly gain in seven months.

(Additional reporting by Cecile Lefort in Sydney and Lisa Twaronite and Hideyuki Sano in Tokyo; Editing by Kavita Chandran/Ruth Pitchford)

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