Cyprus rating raised to AAA by S&P

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Standard & Poor’s Ratings Services raised its transfer and convertibility (T&C) assessments on the Republics of Cyprus (A/Positive/A-1) and Malta (A/Stable/A-1) to ‘AAA’ from ‘AA’.

This follows the decision by EU finance ministers to allow both countries to adopt the euro on Jan. 1, 2008, and brings the T&C assessments on Malta and Cyprus in line with the ‘AAA’ assessments on sovereigns already in the euro area.

Standard & Poor’s T&C assessment is the rating associated with the probability of a sovereign restricting nonsovereign access to foreign exchange needed for debt service. EMU accession will mean that the foreign currency ratings on nonsovereign borrowers in these countries will no longer be constrained by this risk. No ratings on entities domiciled in Cyprus or Malta are currently constrained by the risk that the sovereign may restrict access to foreign exchange needed for debt service, and these are therefore unaffected by the change in the T&C assessment.