Ratings agency Moody’s today said it had placed the deposit and debt standing of six Greek banks, including several leading lenders, on review for a possible downgrade. It similarly placed Greece’s own sovereign ratings on negative watch.
“Moody’s Investors Service has today placed on review for possible downgrade the deposit and debt ratings of… National Bank of Greece (NBG), EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece (ATE) and Attica Bank,” the agency said.
“In addition, the standalone bank financial strength ratings (BFSRs) of NBG, Eurobank and Alpha, have been placed on review for possible downgrade,” Moody’s added in a statement issued in Limassol.
The move came a day after the agency placed Greece’s sovereign bond rating, currently at Ba1, on a similar downgrade watch.
The two measurements are linked, as a lower grade on Greek government bonds could increase pressure on banks that hold these maturities, Moody’s said.
“A possible downgrade of the government’s rating could lead to a downward adjustment to the country’s systemic support indicator (SSI), which is the measure Moody’s uses to determine bank rating uplift,” the agency said.
In particular, it noted that the total government exposure of NBG, Eurobank and Alpha ranges from 80% to over 200% of their capital base.
Greece is caught in a debt crisis and a snowballing recession that followed a scare on the accuracy of government statistics and a resulting spike in its borrowing costs earlier this year.
It is pursuing tough and unpopular reforms to reduce a public deficit that stood at 15.4% of output last year, over five times the allowed EU level.
Ironically, Moody’s noted today that “the additional fiscal adjustments now being implemented by the government may place further strain on the banks’ asset quality”.
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