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    #1

    Downgrades of the banks. What exactly does this mean?

    If there is a delay in payment, even if voluntary, that could be considered a technical default. Analysts say that would spook markets, potentially leading to downgrades of the banks that own much of the debt, ...
    Hello, everyone.

    It seems like the phrase in bold could mean two things.

    There are more than one bank involved, so it's very likely that there will be more than one case in which a bank's grade is made lower.

    If the situation is not getting better, the rate of a bank in question may be made lower more than once.

    I'd like to hear what you think.

    Many Thanks

    Richard

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    #2

    Re: Downgrades of the banks. What exactly does this mean?

    Quote Originally Posted by cubezero3 View Post
    Hello, everyone.

    It seems like the phrase in bold could mean two things.

    There are more than one bank involved, so it's very likely that there will be more than one case in which a bank's grade is made lower.

    If the situation is not getting better, the rate of a bank in question may be made lower more than once.

    I'd like to hear what you think.

    Many Thanks

    Richard
    Not a teacher only a native.


    I would say your first attempt is correct. That there will be more than one bank involved.

    'Downgrades' in this context is a financial term regarding the credit rating of a bank (people can also have credit ratings). A credit rating is basically an evaluation of how likely it is that a borrower will repay a debt.

    If a bank's rating is downgraded, it means a bank will have to pay more money to borrow (higher interest rates) or perhaps be refused a loan, as it will have been deemed less likely to be able to repay the money.

    With regards to your second interpretation, if there was only one bank involved then 'banks' would be singular. For example:
    'Analysts say that would spook markets, potentially leading to a downgrade of the bank that owns much of the debt, ...'

    More likely is that the sentence would mention the single bank by name, '...leading to a downgrade of Barclays, the bank that owns much of the debt...'
    Please note I used Barclays only as an example.

    Like I said at the start, I'm not a teacher only a native, but I hope I have helped you.

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    #3

    Re: Downgrades of the banks. What exactly does this mean?

    Hello, shroob.

    You've really written a long reply that is indeed very helpful. I think now my question is basically solved.

    Having said that, I have to clarify that with my second interpretation, I wanted to find out whether downgrade, here in this specific context, could refer to a case in which a bank's rating is moved downwards. A bank's rating may be marked lower more than once. Then we can have a number of such cases, with more than one bank.

    Richard

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    #4

    Re: Downgrades of the banks. What exactly does this mean?

    Quote Originally Posted by cubezero3 View Post
    Hello, shroob.

    You've really written a long reply that is indeed very helpful. I think now my question is basically solved.

    Having said that, I have to clarify that with my second interpretation, I wanted to find out whether downgrade, here in this specific context, could refer to a case in which a bank's rating is moved downwards. A bank's rating may be marked lower more than once. Then we can have a number of such cases, with more than one bank.

    Richard
    Not a teacher only a native.

    You're welcome.

    I have little knowledge of finance or economics, maybe someone who has more knowledge of this could answer you better, however I will attempt to the best I can. From what I understand, a bank would not get downgraded more than once for a single event. I will try and explain via a crude diagram.

    For this example, the best credit rating you could have is 5, the lowest being 0. If a bank started with a credit rating of 4, then defaulted like in your example, the banks credit rating may go down to 2.
    5 .................5
    4 Rating......4
    3 .................3
    2 .................2 Rating
    1 .................1
    0 ..................0

    You would say that bank had been downgraded. Even though the bank has fallen 2 places, it would still be classed as a single event. If you wanted to stress the extent of the downgrade, you could use such qualifying words such as, 'massively', 'substantially' or, 'seriously'. For example, 'The bank's credit rating was seriously downgraded'.

    If you wanted to say that a bank had been downgraded more than once, this would suggest that numerous downgrades had occured over time. For example if a bank defaulted twice:

    5..................5 ..................5
    4 Rating......4 ..................4
    3..................3 Rating........3
    2 .................2 ...................2 Rating
    1..................1 ...................1
    0 .................0 ...................0

    Then you could say, 'the bank's credit rating has been downgraded numerous time since it has defaulted on its payment twice.'

    I hope I have interpreted your question correctly, if not please feel free to ask again. Like I said, I'm not a teacher nor an expert in finance, hopefully a teacher will reply and voice their opinion on the matter.

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    #5

    Re: Downgrades of the banks. What exactly does this mean?

    This is really much more than I expected, mate.

    You've not only solved my problem, but also given me a good and brief lesson about the language concerning credit rating.

    Thank you very much.

    Best wishes

    Richard

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