Moody's Investors Service downgraded its ratings of Bank of
Cyprus PCL (BOCY.CP), Cyprus Popular Bank PCL (CPB.CP) and Hellenic
Bank PCL (HB.CP) by one notch, on expectations of material losses
for bank depositors amid serious problems in Cyprus's banking
sector.
Moody's cut the deposit and senior unsecured debt ratings of the
three banks to Caa3, nine steps into junk territory, from Caa2. The
ratings have also been placed on review for downgrade.
Cyprus was in intensive talks Friday with its international
creditors over a deal to rescue the country from financial collapse
as details emerged ahead of a crucial parliamentary debate over a
radical bank restructuring plan that would close the country's
second biggest lender and see its big depositors lose more than a
third their savings.
Cypriot banks have been closed since March 16, when Cyprus
agreed on a EUR10 billion bailout from the European Union and the
International Monetary Fund that would have seen all deposits taxed
with a one-off levy. But the plan was met with furious public
opposition and was rejected earlier this week by Cyprus's
parliament.
Uninsured depositors of Cyprus Popular Bank stood to lose up to
40% of their savings under the plan, European and Cypriot officials
with knowledge of the talks said Friday.
Moody's said it expects material losses for bank depositors, is
concerned about the risk of further deposit controls once the banks
reopen, and notes a heightened uncertainty regarding the banks'
recapitalization plans.
The ratings firm said it will assess the impact of the measures
ultimately adopted to address the banking crisis. It also believes
that the banks' franchises and business models will remain impaired
over the long term.
In January, Moody's cut its rating of Cyprus to Caa3, nine steps
into junk territory.
Write to Debbie Cai at debbie.cai@dowjones.com
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