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The onset of the pandemic may have inflicted unprecedented economic and financial damage, but it barely dented the credit ratings of the world’s major financial institutions, Fitch Ratings says.

An analysis of global financials’ credit ratings — including banks, insurers and non-bank financials — found that the average rating slipped by just 0.15 of a notch during the pandemic, compared with a 0.84 drop during the global financial crisis, and 0.71 during the eurozone crisis from January 2010 to 2013.

Global financials suffered a significant increase in downgrades after the pandemic hit, but the number of negative rating actions was much smaller than during the financial crisis, and the share that involved multi-notch downgrades was also much lower, the research found.

In 2020 just 2.3% of global financials faced multi-notch downgrades, compared with 14.2% in 2009, Fitch reported.

“The vast majority of ratings were unchanged in 2020 because near-term credit risks were largely offset by government support to economies and borrowers,” the report said.

Additionally, regulators in some jurisdictions eased requirements, which helped issuers to operate amid a period of great uncertainty, it noted.

“Bank and [non-bank financials’] ratings were more affected than insurance ratings, primarily reflecting adverse operating environment and asset quality dynamics, and in the case of [non-banks], elevated funding pressure,’ the report said.

Most of the negative rating activity involved putting companies on rating watch, or negative outlook, without lowering ratings, Fitch said.

Those negative watches and outlooks have steadily declined since mid-2020, “as pressure from the pandemic has receded as a result of rapid vaccinations in many developed markets, the easing of lockdown measures and a general economic recovery,” the report noted.

Financials that were downgraded often faced “secular challenges” rather than temporary pressures inflicted by the pandemic, it said.

Also, in certain emerging markets, particularly in Latin America, banks’ ratings were affected by sovereign rating actions too.

For both insurers and non-bank financials, the proportion of ratings on watch or negative outlook have returned to pre-pandemic levels. But, for banks, it’s taking longer to normalize “due to lingering operating environment and sovereign risks,” it said.

Downgrade risks remain concentrated in Latin America, Fitch said, along with some banks in the Middle East and Africa, “which could face pressure as monetary policy normalizes.”

“We believe peak global fiscal stimulus has passed, with the policy debate increasingly focused on inflationary pressures,” it said.