Fitch cuts Latvia

Fitch Ratings said it has downgraded the Republic of Latvia's long-term foreign currency issuer default rating to BBB- from BBB, long-term local currency issuer default rating to BBB from BBB+ and Country Ceiling to A- from A. The short-term foreign currency issuer default rating is affirmed at F3.

In addition, Fitch said it has placed Latvia's sovereign ratings on rating watch negative.

"The downgrade and rating watch negative reflects Fitch's view that in the absence of substantial and timely international financial support, Latvia faces the likelihood of a severe financial and economic crisis and a further downgrade of its ratings," said Eral Yilmaz, associate director in Fitch's sovereigns group.

The Latvian government took over the country's second-largest bank, Parex banka, with assets equivalent to more than 20% of GDP, for a nominal fee at the weekend following a deposit run by both residents and non-residents, which has seen the bank lose 12% of its deposit base, the agency added.

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