Moody’s Downgrades Volkswagen’s Credit Rating Amid Profitability Concerns

by THEFUTURE.TEAM

March 18, 2025

Volkswagen’s financial standing took a hit as Moody’s downgraded the automaker’s long-term credit rating from “A3” to “Baa1”, citing shrinking profit margins, weakening free cash flow, and intensifying competition from Chinese automakers. The downgrade signals moderate credit risk, meaning Volkswagen’s debt, while still investment-grade, now carries speculative characteristics.

Why The Downgrade?

Moody’s decision reflects Volkswagen’s declining operating profits and ongoing financial pressures. Despite being Europe’s largest carmaker, the company is navigating a turbulent landscape shaped by:

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Rising investment demands in electric vehicle (EV) production.
Cost-cutting measures in key markets like Germany and China.
Geopolitical trade tensions, particularly with China, which is driving down profits.

Volkswagen itself acknowledged the uphill battle, warning last week that 2024 will be another year of challenges as it tries to increase EV sales, reduce costs, and fend off competition from aggressive Chinese automakers. The company expects up to €1 billion in lost profits in China by 2025.

Can Volkswagen Recover?

Despite the downgrade, Moody’s remains cautiously optimistic about Volkswagen’s long-term outlook. The agency believes that if cost-cutting measures and strategic shifts are successfully implemented, the company could see improved profitability by 2026-2027.

Volkswagen’s strong balance sheet and robust liquidity give it time to execute its turnaround strategy. However, lower credit ratings often increase borrowing costs, which could add further pressure as the company ramps up investments in new EV models and technology advancements.

What’s Next?

While Volkswagen remains three notches above junk status, the downgrade serves as a warning that its financial resilience is being tested. With competition heating up and margins tightening, the automaker’s ability to balance aggressive EV expansion with profitability will determine whether it can regain lost ground—or face further credit downgrades in the future.

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Central Bank Of Cyprus Balance Sheet Reflects Strong Eurosystem Position

by THEFUTURE.TEAM

February 17, 2026

Overview Of Financial Stability

The Central Bank of Cyprus (CBC) has released its latest balance sheet, reaffirming its steadfast role within the Eurosystem. The balance sheet, featuring total assets and liabilities of €29.545 billion, underscores the institution’s stable financial posture at the close of January 2026.

Asset Allocation And Strategic Holdings

Governor Christodoulos Patsalides issued the balance sheet, which details the CBC’s asset composition under the Eurosystem framework. Notably, the bank’s gold and gold receivables amounted to €1.635 billion, providing a significant hedge and stability to its balance sheet. Additional asset categories include claims on non-euro area residents denominated in foreign currency at €1.099 billion, while claims on euro area residents in both foreign and domestic currency add further depth to its portfolio.

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The most substantial asset category, intra-Eurosystem claims, reached €19.438 billion, an indication of the CBC’s deep integration with its European counterparts. Furthermore, euro-denominated securities held by euro area residents contributed €6.587 billion. Despite a marked emphasis on these areas, lending to euro area credit institutions in monetary policy operations recorded no activity during the period.

Liability Structure And Monetary Policy Implications

On the liabilities side, banknotes in circulation contributed €3.218 billion. Liabilities to euro area credit institutions associated with monetary policy operations were notably the largest single category, totaling €17.636 billion. Supplementary liabilities included those to other euro area residents, which aggregated to €4.989 billion, with government liabilities playing a predominant role at €4.754 billion.

Other liability items, such as claims related to special drawing rights allocated by the International Monetary Fund at €494.193 million, and provisions of €596.571 million, further articulate the CBC’s exposure. Revaluation accounts stood at €1.643 billion, and overall capital and reserves were confirmed at €333.822 million, completing the picture of a well-capitalized institution.

Conclusive Insights And Strategic Alignment

The detailed breakdown illustrates the CBC’s sizeable intra-Eurosystem exposures, reinforcing its central role within Europe’s monetary landscape. With an asset-liability balance maintained at €29.545 billion, the CBC’s financial position remains robust, indicating a commitment to structural stability and strategic risk management.

This fiscal disclosure not only provides transparency into the CBC’s operations but also serves as a benchmark for comparative analysis among other central banks within the Eurosystem, highlighting the intricate balance between asset liquidity, regulatory oversight, and monetary policy imperatives.

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