Standard & Poor's downgraded Ireland's debt rating by one notch on Wednesday due to concerns over possible increased capital requirements by the country's banks.
S&P downgraded Ireland to an "A-" rating from "A" and kept its rating at CreditWatch with negative implications, where it's been since November, because of questions about the capital needs of the country's largely state-owned banks. Ireland's short-term credit ratings were also downgraded by one notch.
"Were the labor market to deteriorate further, a rise in the level of delinquencies in the domestic banks' mortgage books could result in higher new capital requirements than we presently assume," Standard & Poor's sovereign credit analyst Frank Gill said in a statement.
Irish banks in November received an 85 billion euro ($117 billion) bailout package from the European Union, causing regulators to further review banks' capital requirements. Two months before that request, Allied Irish Banks (AIB) agreed to sell its Polish assets to Spain-based Banco Santander for 3.1 billion euros.
An Irish Department of Finance spokesman said the country's economy is stabilizing because of increased exports and more stringent borrowing requirements, according to The Wall Street Journal. The department is forecasting a 1.7% growth rate in the Irish economy this year, while the Central Bank of Ireland this week cut its growth forecast to 1% from 2.4%, The Journal reported.