Banks follow sovereign downgrade

MOODY`S Investors Service has downgraded the senior unsecured debt and deposit ratings of three Cypriot banks to Caa2 and lowered the standalone credit assessments of two of those banks, Hellenic Bank Public Company Ltd to caa3 from caa2 and Cyprus Popular Bank Public Co Ltd to ca from caa3. The outlook on the banks` senior debt and deposit ratings is negative, the ratings agency said.
According to Moody’s, the rating action was triggered by the downgrade of Cyprus`s government bond rating to Caa3 on January 10, and reflects the uncertainty regarding the timing and conditions of a finalised Memorandum of Understanding (MoU) between the Cypriot government and the International Monetary Fund, the European Union and the European Central Bank to finance bank recapitalisations.
Moreover, the rating agency says that it reflected heightened risk of sovereign default, which could jeopardise the effectiveness of bank recapitalisations once the external support programme is in place, as well as the associated impact of increased sovereign credit risk on banks` standalone credit profiles, given the banks` sizable portfolios of government securities.

The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.