Moody's Downgrades Top Three Cypriot Banks

by Lorys Charalambous, Tax-News.com, Cyprus

07 August 2003

Ratings agency Moody's Investors Services has announced its decision to downgrade Cyprus's three largest banks - the Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank - following its recent review of the country's banking sector.

For the Bank of Cyprus, this has resulted in its long term currency rating being downgraded one notch from A2 to A3. Also, the foreign currency subordinated bond rating has been lowered by a notch to Baa1 from A3.

The Cyprus Popular Bank meanwhile, has had its long term foreign currency deposit rating downgraded two notches from A2 to Baa1 in addition to a two notch downgrade of its foreign currency subordinated bond rating to Baa2 from A3.

The long term foreign currency deposit rating of Hellenic Bank has been downgraded by Moody's three notches to Baa2 from A2.

The ratings agency explained that their decision to downgrade the Cypriot banks was as a consequence of stricter rules imposed by the EU mainly on the issue of state support. Under EU regulations, banks cannot receive support from non-market sources.

Moody's has also indicated that the rating for the Cyprus Popular Bank is still under review, raising the possibility that the bank may undergo further downward revisions of its ratings in the near future.

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