With Italy facing a potentially deeper and more prolonged recession than we had originally anticipated, we are of the view that the vulnerability of Italian banks to the impact of rising loan losses has increased due to the combined effect of mounting problem assets and reduced coverage of loan loss reserves. In our view, Unione di Banche Italiane Scpa (UBI Banca) is vulnerable to the effects of increases in its stock of problem assets, given that its coverage of these assets through provisioning has steadily declined over the past four years. We are therefore lowering to 'BBB' from 'BBB+' our long-term counterparty credit rating on UBI Banca. The negative outlook reflects the possibility of a downgrade if we anticipate that
