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Moody's Lowered the Credit Rating of Six Major Greek Banks Again

16 June 2010 / 13:06:11  GRReporter
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The International Evaluation Agency Moody's Investors Service lowered again the credit rating of six of the largest Greek banks as a natural consequence of the revaluation of Greece's credit rating this week from A3 to Ba1. Moody's lowered its assessment of the deposits and debts of the National Bank of Greece from Baa2/Prime-2 to Ba1/Not-Prime. The fall with EFG Eurobank Ergasias is from Baa3/Prime-3 to Ba1/Not-Prime. The international credit-rating agency estimated that the General Bank and Emporiki Bank fell to Baa3/Prime-3 from Baa2/Prime-2. The assessment of Alpha Bank AE was reduced to Ba1/Not-Prime from Baa3/Prime-3 and of the Agricultural Bank of Greece from Vaa3/Prime-3 to Ba2/Not-Prime.  

Moody's confirmed that the assessment of long-terms loans and deposits of the Greek branches of Piraeus changes to Ba1 and of Attica Bank to Ba2. In addition, the long-term assessment of Marfin Egnatia Bank remains Baa2 with a trend towards reduction in the coming months. Moody's emphasized that the lowering of the credit rating of the Greek banks is not directly linked to their activities. The assessment decline reflects the ability of the government to support the banking system in the country after Greece was lowered to Ba1 category or assessed as a country that is threatened to suspend the repayment of its external debt. Four of the banks with lowered credit rating (National Bank of Greece, EFG Eurobank, Alpha Bank and Agricultural Bank of Greece) are in the agency’s speculative investments lists.

The lowered credit rating of Greece from A3 to Ba1 at the beginning of the week caused an avalanche of negativity in the country and abroad. Qualifications of the evaluation as “unfair”, “unreasonable”, “illogical” and even “provocative” and “inadequate” could be seen in the local press. According to the EUROGROUP President and Prime Minister of Luxembourg Jean-Claude Juncker the Moody's decision is absurd. The Commissioner for Economic Affairs of the European Union Olli Rehn defined the evaluation as unexpected and said: “Lowering the credit rating of Greece does not meet the profitability of Greek government bonds nor the value of the spread of the CDS securities which indicate a significant drop after the conclusion of the agreement on the rescue of Greece.”

”In April, Moody's has left opened the possibility of further deterioration in the credit rating of Greece until more detailed information on the financial assistance provided by the Eurozone countries and the International Monetary Fund (IMF) is submitted. The assessment Ba1 reflects our analysis of the balance of benefits and risks associated with the absorption of the assistance,” told the leading analyst of Moody's Sarah Carlson for the Greek newspaper Naftemboriki. She explained that the biggest risk for the Greek economy is whether the government will be able to follow and maintain the government in the right direction of development. Carlson emphasized that even a slight deviation from the objectives set in the Program for stability and development as well as from the agreements with the IMF could lead to a significant increase in the debt to GDP ratio.

The financial analyst is explicit that Greece has three years to restore positive economic growth in the country and to drop its government deficit to 3% of GDP from the current nearly 14% of GDP. According to the IMF report, if GDP growth is only one point lower than projected for the period of the contract for financial assistance, the external debt will rise to 166 percent of GDP by 2020.

”The international market underestimated the credit risk Greece hides for many years,” says Sarah Carlson. She explains that this is the main reason the interest on state loans in the country to become almost equal to the credit values in Germany, although the credit assessment of Greece was A1 and Germany's AAA, ie four points higher.

Tags: EconomyMarketsCompanies
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