- Cyprus Property News Magazine - http://www.news.cyprus-property-buyers.com -

Fitch places three top banks on rating watch negative

FITCH Ratings has placed Bank of Cyprus, the Cyprus Popular Bank and the Hellenic Bank’s Long-term Issuer Default Ratings and Support Rating Floors of ‘BB+’ and Support Ratings of ‘3’ on Rating Watch Negative.

At the same time, the agency has downgraded the Bank of Cyprus’ and the Hellenic Bank’s Viability Rating to ‘b-‘ from ‘bb-‘ and the Cyprus Popular Bank’s to ‘f’ from ‘b-‘.

Fitch said that the move reflects the fact that Cypriot banks remain highly sensitive to the heightened risks in Greece, in particular if Greece was unable to sustain its membership of Economic and Monetary Union.

In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF programme of fiscal austerity and structural reform, an exit of Greece from EMU would be probable and this would likely result in widespread default on private sector as well as sovereign euro-denominated obligations.

The Fitch rating actions came as President Christofias told reporters that he had not ruled out asking for Eurozone bailout funds to help the island’s second-largest bank, the Cyprus Popular.

During an official visit to Austria President Christofias said that the government was seeking ways to “avoid entering the support mechanism. We are in discussions and very soon we must take the final decisions”.

In its announcement, Fitch said that the Cyprus Popular Bank is the most exposed to the Greek debt, with 49% of its total loans at the end of last year, followed by the Bank of Cyprus at 34% and the Hellenic Bank at 17%.