YEREVAN, June 13. /ARKA/. Moody’s has downgraded two Cyprus banks citing their large exposure to a possible Greek exit from the eurozone, The Sydney Morning Herald reports.
As Cyprus was being increasingly seen as the next eurozone candidate for a bailout after Spain, Moody’s chopped its rating for Bank of Cyprus by one notch to B2 from B1, while Hellenic Bank’s rating dropped to B1 from Ba3.
Cyprus Popular Bank, currently at B3 – lower than the other two – was placed on review for a possible downgrade.
Moody’s said the three banks had large exposures to borrowers in Greece, which goes to the polls on Sunday in a vote that could lead to the country’s exit from the eurozone, which would likely spark deep financial turmoil.
Cyprus Popular Bank has 42 per cent of its net loans to Greek borrowers, Bank of Cyprus 34 per cent of gross loans, and Hellenic Bank 17 per cent of gross loans.
“As such, their capital positions remain susceptible to the direct and indirect consequences of a Greek exit,” said Moody’s.
Moody’s said it views the chance of Greece’s pullout from the eurozone “as substantial” and that “the probability of such an outcome may increase further following the Greek parliamentary elections on 17 June.”
Cyprus conceded last week that it may need a European Union bailout to save its banking system.
“The possibility of addressing the (European) financial stability mechanism to support the banking system, due to the problems created by excessive exposure of banks to Greece, is a serious possibility,” deputy government spokesman Christos Christofides told reporters.
He said the government was looking at various ways to support the banks, which included finding a loan “from elsewhere.”
Cyprus has already secured a 2.5 billion euro ($3.2 billion) low-interest loan from Russia to cover its refinancing needs for this year.-0-
