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Fitch downgrades covered bonds of two Cyprus banks

The covered bonds of the Bank of Cyprus and the Marfin Popular Bank have been downgraded by Fitch Ratings following the downgrade of Cyprus’ sovereign rating and the subsequent downgrades of Marfin and BoC’s’ Long-Term Issuer Default Ratings.

FITCH Ratings has downgraded Marfin Popular Bank (Marfin, ‘BB+’/Negative/’B’/) and Bank of Cyprus’s (BoC, ‘BB+’/ Negative/’B’) Cypriot covered bonds, as follows:

  • Marfin covered bonds (Programme I): downgraded to ‘BBB-‘ from ‘BBB’; maintained on Risk Watch Negative (RWN).
  • Marfin covered bonds (Programme II): downgraded to ‘BBB-‘ from ‘BBB’; RWN removed.
  • BoC covered bonds: downgraded to ‘BBB-‘ from ‘BBB’; maintained on RWN.

According to Fitch, the outstanding Cypriot covered bonds represent €4.2 billion of Fitch-rated debt on aggregate, including:

  • €2 billion of bonds issued by Marfin under Programme I (Greek mortgage pool),
  • €1.5 billion of covered bonds issued by Marfin under Programme II (Cypriot mortgage pool)
  • €700 million of covered bonds issued by BoC (Greek mortgage pool).

The covered bonds under all three programmes are issued under the Cypriot legal covered bond framework and regulated by the Central Bank of Cyprus.

The rating actions follow the downgrade of Cyprus’ sovereign rating to ‘BBB-/ Negative’ from ‘BBB/RWN’ on 27 January 2012, and the subsequent downgrades of Marfin and BoC’s’ Long-Term Issuer Default Ratings (IDR) to ‘BB+/Negative’ on 2 February 2012.

Further reading

Fitch Downgrades Three Cypriot Covered Bonds

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