YEREVAN, March 19. /ARKA/.Fitch Ratings has placed the ratings of Bank of Cyprus (BOC), Cyprus Popular Bank (CPB) and Hellenic Bank (HB) on Rating Watch Negative to reflect downside rating risks arising from the deliberations to impose losses onto the banks’ depositors, Reuters reported today referring to the agency.
Ratings placed on Negative Watch include the entities’ ‘B’ Long-term Issuer Default Ratings (IDRs) and the ‘c’ (BOC, CPB) and ‘cc’ (HB) Viability Ratings.
A full list of rating actions is provided at the end of this comment. Such losses would be part of an agreement the Eurogroup (European Union finance ministers) reached with Cypriot authorities on Saturday March 16, 2013 as a precondition to provide EUR10 billion in financial assistance to Cyprus. Initially, Cyprus agreed to impose ‘levies’ of 9.99% on all deposits over EUR100,000 and of 6.75% on deposits below that level, although subsequent newsflow suggests that these thresholds may be subject to change, with a view to protect smaller deposits.
RATING DRIVERS AND SENSITIVITIES – IDRs, SRs and SRFs
The Negative Watches will be resolved after a decision by the Cypriot parliament on the above extraordinary measures, which could come as early as today. The crystallisation of such significant losses on depositors would constitute a restricted default (RD) under Fitch’s rating definitions, in which case the IDRs would be downgraded to ‘RD’. The banks’ Support Ratings and Support Rating Floors would also be downgraded to ‘5’ and ‘No Floor’.
RATING DRIVERS AND SENSITIVITIES – SENIOR DEBT
Although senior debt securities are not currently the subject of the levy deliberations and so would not automatically be downgraded upon the imposition of a deposit levy, their ratings have also been placed on Negative Watch to reflect the heightened risk of some form of negative rating action or default under Fitch’s definitions because of the crisis in the Cypriot banking sector.
RATING DRIVERS AND SENSITIVITIES – VIABILITY RATINGS
The Negative Watch on the banks’ VRs reflect the likelihood that they would be downgraded to ‘f’ in the event that the IDRs are downgraded to RD. The following ratings have been placed on Negative rating Watch: BOC Long-term IDR: ‘B’ Short-term IDR: ‘B’ Viability Rating: ‘c’ Support Rating: ‘4’ Support Rating Floor: ‘B’ Senior notes: ‘B’/RR4’ Commercial paper: ‘B’ CPB Long-term IDR: ‘B’ Short-term IDR: ‘B’ Viability Rating: ‘c’ Support Rating: ‘4’ Support Rating Floor: ‘B’ Senior notes: ‘B’/RR4’ HB Long-term IDR: ‘B’ Short-term IDR: ‘B’ Viability Rating: ‘cc’ Support Rating: ‘4’ Support Rating Floor: ‘B’ The rating impact, if any, from the above rating actions on the banks’ covered bonds will be detailed in a separate comment.—0-
