Moody's downgrades 2 Cypriot banks

AP News
Posted: Jun 12, 2012 5:19 PM
Moody's downgrades 2  Cypriot banks

Credit ratings agency Moody's on Tuesday downgraded two of Cyprus' top three commercial banks by one notch over the heightened risk that Greece may leave the eurozone.

Moody's said in a statement that it has cut the deposit ratings of the Bank of Cyprus to B2 from B1 and of Hellenic Bank to B1 from Ba3.

The agency said it has placed both banks _ the island's first and third largest lenders, respectively _ on review for further downgrade.

It said has also placed Cyprus Popular Bank, the country's second-largest lender, on review for a possible downgrade.

Moody's said all three banks' extensive branch operations in Greece make them vulnerable to the increased risk of a Greek euro exit because it could speed up deposit outflows from their Greek branches.

It said a full-fledged Greek euro exit would "materially weaken the banks' solvency."

The downgrades come amid mounting speculation that Cyprus will become the fifth eurozone country to ask for a European Union bailout.

Cyprus needs euro1.8 billion ($22.5 billion) _ or about a tenth of its budget _ by an end-of-month deadline to help recapitalize Cyprus Popular bank, which is most exposed to Greece. But the country can't borrow from international markets because of its junk credit rating by two of three global ratings agencies.

Cyprus government spokesman Stefanos Stefanou said Tuesday that the country is considering applying for an EU bailout, but has yet to make a decision.