YEREVAN, March 26. /ARKA/. Ratings firm Fitch Ratings has downgraded the two largest Cypriot banks following the agreement Cypriot authorities reached with European Union authorities on Monday morning, Foxbusiness reported Tuesday.
The agreement previews the resolution and winding down of Cyprus Popular bank, the second largest bank in Cyprus, commonly known as Laiki Bank. It also previews a deep restructuring for Bank of Cyprus, the country’s largest bank.
Laiki Bank will be split into a “good bank” and a “bad bank,” the latter will be liquidated over time. The “good bank” assets will be transferred to Bank of Cyprus. Therefore, Cyprus Popular Bank has been downgraded to D, equivalent of Default.
Fitch expects its banking licence to be revoked and the bank to be subject to liquidation proceedings.
Bank of Cyprus, the largest Cypriot bank, has been downgraded to “SD”, “Selective Default”.
Under the agreement, Bank of Cyprus is likely to be subject to considerable restructuring, which may include the disposal of its Greek operations, affecting its overall credit fundamentals, Fitch said.
Fitch expects enforcement of losses on its uninsured deposits to be “material”.
The downgrades of both banks come as an effect of losses imposed on senior creditors agreed as part of Monday’s deal, which triggered a default, Fitch said.—0-
