Moody's Investors Service has downgraded its ratings on the Bank
of Cyprus PCL (BOCY.CP), the island's biggest bank, further into
highly speculative territory, citing expectations of material
losses for the bank's creditors in the coming months.
Moody's downgraded Bank of Cyprus's deposit ratings to Ca from
Caa3. The outlook is negative.
Meanwhile, Moody's affirmed Hellenic Bank PCL's (HB.CP) deposit
ratings at Caa3 with a negative outlook. The bank, which currently
complies with regulatory minimum capital requirements, is not
subject to any type of restructuring under the recently adopted
bank resolution framework for Cyprus. However, Moody's noted the
bank faces a risk of potential losses in the coming years.
Both actions conclude the reviews on the banks' ratings that was
initiated last month.
Cypriot authorities and the Eurogroup reached an agreement for a
support program to address Cyprus's banking crisis late last month.
As part of the program, the Central Bank of Cyprus appointed a
special administrator to implement the restructuring and
recapitalization of Bank of Cyprus, which faces a large capital
shortfall, Moody's noted.
Following the re-opening of banks in on March 28, deposit
controls have been maintained on all banks operating in Cyprus.
Moody's said it expects a sharp deterioration in the operating
environment, which will erode domestic borrowers' credit profiles,
increasing the two banks' capital needs.
Earlier Friday, euro-zone finance ministers approved the
proposed EUR10 billion rescue package for the island.
Last month, Cyprus became the first euro-zone country to impose
capital controls to forestall a run on its main banks. Those
measures followed an emergency bank holiday of nearly two weeks
that Cyprus imposed during often-chaotic negotiations with its
international creditors.
Write to Nathalie Tadena at nathalie.tadena@dowjones.com
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