Moody's Investor Services said Thursday it will downgrade its ratings for subordinated debts of Long-Term Credit Bank of Japan and LTCB Finance, adding the ratings will remain under review for further possible downgrade.
The two ratings were lowered to B1 from Ba1. Moody's also said the bank's senior debt and deposit ratings will also be watched.
The rating agency said it is increasingly concerned about LTCB's financial base, especially in terms of its asset quality and capital. "Its very limited financial resources to absorb prospective credit expenses" was also a factor in the downgrade, it said.
The risk associated with the subordinated debts has risen due to concerns that the government may move to deal with failed banks under a system where such junior claims might be treated less favorably, it added.
LTCB has seen its stock price fall sharply twice this month on market rumors of financial troubles. It has repeatedly said its lending and fundraising business is in good shape.