S&P Global Ratings downgraded the long-term counterpartycredit ratings of Higo BankLtd. and KagoshimaBank Ltd. to A- from A.
The outlooks on the long-term ratings are stable.
At the same time, S&P lowered the banks' short-termcounterparty credit ratings to A-2 from A-1.
The group credit profile of , thebanks' parent, was lowered to "a-" from "a" to reflect therating agency's lower assessment of its capital and earnings.
S&P said the group's risk-adjusted capital ratiodeclined to less than 10% in the fiscal year ended March 31. Further, thegroup's profitability dropped due to Bank of Japan's negative interest ratepolicy.
The rating agency said it may raise its assessment on thegroup's capital and earnings if the group is able to recover highercapitalization and if it maintains its risk-adjusted capital ratio above 10%.In such a scenario, S&P could upgrade the long-term ratings of Higo Bankand Kagoshima Bank back to A.
S&P could lower the banks' ratings if it downgrades thegroup credit profile in the event of a downgrade of Japan's sovereign rating.
S&P Global Ratingsand S&P Global Market Intelligence are owned by S&P Global Inc.