FILE PHOTO: The logo of credit rating agency Moody's Investor Services is seen outside the office in Paris

South Africa’s banks and insurance companies have been downgraded in keeping with the countries downgrade.

Moody’s downgrade of global scale Insurance Financial Strength and related debt ratings of South African insurance groups including related entities is a direct result of the country’s rating. Moody's considers the banks and insurance groups' key credit fundamentals (asset quality, capitalisation, profitability and financial flexibility) to be partly correlated with -- and thus linked to -- the economic and market conditions in South Africa.

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The sovereign downgrade reflects Moody's view that recent political developments suggest a weakening of the country's institutional strength which casts doubt over the strength and sustainability of the recovery in growth and the stabilization of the debt-to-GDP ratio over the near-term.

Last week, Moody's said there was evidence of systemic erosion of the independence of key South African institutions such as the judiciary, the SA Reserve Bank, and National Treasury. Moody's had cited the abrupt cabinet reshuffle in March as illustrating a gradual erosion of institutional strength.