Moody’s cuts Greek bank ratings

Ratings agency Moody's downgraded six Greek banks after on Wednesday slashing the country's sovereign rating by three-notches earlier this week.
Greek bank shares fell by as much as 3% during Tuesday's session on expectations of the move by Moody's which follows naturally from its decision to cut the sovereign rating.
The action affects the deposit and debt ratings of National Bank of Greece (NBG), EFG Eurobank, Alpha Bank, Piraeus Bank, ATEbank and Attica Bank. The rating agency had cut the ratings of three Cyprus banks a week earlier, each with a substantial exporsure to the Greek market – Bank of Cyprus and Marfin Popular Bank by one notch each, and the smaller Hellenic Bank by two notches.
Moody's slashed Greece's credit rating by three notches on Monday, citing an increased default risk that pointed to the threat of the distressed euro zone sovereign having to restructure its debt, perhaps before 2013.
Moody's downgraded NBG to Ba3 from Ba1, Eurobank to Ba3 from Ba1, Alpha to Ba3 from Ba1, Piraeus to Ba3 from Ba1, Agricultural to B1 from Ba2, and Attica to B1 from Ba2. It said the outlook on all these ratings is negative.
Explaining the rationale for the action, Moody's said a government's credit strength serves as a key input in assessing the capacity of a country to support its banking system.
Banks' intrinsic financial strength was reviewed because of persistent pressure on liquidity, asset quality and their exposure to Greek government debt.
"Although Moody's central scenario is that holders of Greek government debt will not bear losses, the rating agency believes the likelihood of a sovereign default or distressed exchange has risen, as denoted by the new B1 government rating," Moody's said.
Moody's said the downgrade also reflected Greek banks' limited funding options and their dependence on ECB funding, which accounts for at least 20% of their balance sheet.