S&P cuts Russia's outlook on bank bailout costs

Published: 23 Oct 2008 18:08:28 PST

LONDON, Oct 23 - Credit ratings agency Standard & Poor's cut its outlook for the Russian Federation to negative from stable on Thursday, warning of the costs of bailing out troubled banks and a rising risk of a budget deficit.

S&P reaffirmed Russia's BBB+ long-term foreign currency and A- short-term local currency ratings.

"The outlook revision reflects the likelihood of a downgrade if costs to the Russian government of the bank rescue operations continue to increase amid rising capital outflows as confidence in the financial system and monetary regime declines," S&P credit analyst Frank Gill said.

S&P said it expected corporate and financial sector default rates to increase, and was also worried that the budget might move into deficit in 2009 -- reversing a previous steady decline in the government's debt burden.