One of the world’s three main credit agencies has lowered its rating for Banque International à Luxembourg, which is 90% owned by the Qatari investment vehicle Precision Capital, saying it expected reduced state guarantees for the bank.

Fitch Ratings downgraded BIL’s rating from “A-” (the 7th highest score in the credit bureau’s 22 ratings scale) to “BBB+” (the 8th).

“BBB” scores are at the bottom end of the “investment grade” spectrum. Many institutional investors, such as pension funds, would have to sell BIL’s bonds if the rating fell below “BBB-”. In addition, a lower credit score typically leads to higher borrowing costs in the capital markets.

With the EU’s new bank bailout agencies in operation, Fitch reckoned that Luxembourg’s government (which owns the remaining 10% of BIL shares) would no longer automatically rescue the bank if it ran into troubled waters. “Senior creditors can no longer rely on receiving full extraordinary support from the sovereign in the event that BIL becomes non-viable,” Fitch said on Tuesday after EU financial markets closed.

At the same time: “BIL’s sound retail and commercial banking franchise in Luxembourg, resulting in some geographical concentration to a small but strong economy” remained positive factors in Fitch’s analysis, as well as “BIL’s overall healthy loan book, strong capital ratios and ample liquidity.”

A spokeswoman for BIL told Delano that Fitch only adjusted the bank’s debt score and did not downgrade the bank’s “viability rating”, or the likelihood that BIL would need state support. “In leaving the standalone rating unchanged, Fitch confirms BIL’s strong intrinsic value,” she said on Wednesday. The spokeswoman added that the change had been expected since Fitch changed its ratings methodology last year.

Benelux review

The downgrade came as part of the agency’s review of several Benelux banking groups. Fitch also downgraded the Belgian bank Belfius and Dutch banks ABN AMRO, ING Bank and SNS Bank, while it affirmed scores for Belgium’s KBC and the Netherland’s Rabobank. All of those institutions remained investment grade.

Separately, it downgraded the French municipal banking part of Dexia, BIL’s former parent that now only operates in Belgium and France following a state bailout by those two countries and Luxembourg (which still owns a small stake in the bank). Fitch lowered Dexia Credit Local’s score from “BBB+” to “BBB-”, also saying that it expects a lower level of state support for European banks in the future.