Six Greek banks suffer downgrades

Six Greek banks’ deposit and debt ratings have been downgraded by Moody’s, reflecting the negative outlook on government bonds and challenging macroeconomic conditions for the country.

Already broadly classified as “speculative” grade, four of the Greek banks dropped two notches from Ba3 to Ba1, falling to the lowest end of the “questionable credit quality” spectrum.

National Bank of Greece SA (NBG), EFG Eurobank Ergasias SA (Eurobank), Alpha Bank AE (Alpha) and Piraeus Bank SA were affected.

Two of beleaguered Greece’s banks meanwhile sank into deeper risk territory, being downgraded from Ba2 to B1.

Agricultural Bank of Greece and Attica Bank SA were judged by the ratings agency as “subject to high credit risk” and of “generally poor credit quality”.

Driving the change was the decision by Moody’s to downgrade Greece’s government bond ratings from Ba1 to B1 status on 7 March 2011.

It then determined the likelihood of sovereign default or distressed exchange had risen.

At the same time, Greece’s systemic support indicator (SSI), a measure of the ability of a country to support its banking system, was lowered by three notches from Baa3 to Ba3.

SSI includes guarantees and refinancing options for banks available through the EU. As a result, some Greek banks hold ratings one notch higher than government bonds issued by the country.

Exposure to government bonds saw three of the six Greek banks plunge further as per their standalone financial strength in the latest review.

Alpha, which carries 80% of its Tier 1 exposure to government bonds, fell one notch. NBG and Eurobank each hold 150% plus exposure, knocking their respective ratings down by two.

Separately, Credit Suisse also revised down its overall ratings for European banks to benchmark from a slight overweight.

Part of the drag came from the proportion of government debt Greece needs to write off, 37%, as well as Ireland which holds 27%.

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