If you thought that things could not get any worse credit ratings agency Moody’s Corporation has downgraded six Greek banks following the downgrade of Greece’s sovereign rating earlier this week.

A Moody’s statement this week said the agency had downgraded the ratings of National Bank of Greece (NBG), EFG Eurobank Ergasias (Eurobank), Alpha Bank, Piraeus Bank, Agricultural Bank of Greece (ATEbank), and Attica Bank, adding that the outlook on all these ratings is negative.

In relation to the decision to downgrade Greece’s government bond ratings to B1 from Ba1 on 7 March, Moody’s said that under its methodology, a government’s credit strength serves as a key input in assessing the capacity of a country to support its banking system which, in turn, can provide rating uplift to a bank’s deposit and debt ratings. It said the agency’s re-assessment of some banks’ intrinsic financial strength (standalone BFSRs) was due to persistent pressure on liquidity and asset quality, and the banks’ material exposure to Greek government securities.

“Although Moody’s central scenario is that holders of Greek government debt will not bear losses, the rating agency believes that the likelihood of a sovereign default or distressed exchange has risen, as denoted by the new B1 government rating,” the statement said. Moody’s downgraded the ratings of the National Bank of Greece (NBG) to Ba3 from Ba1, Eurobank to Ba3 from Ba1, Alpha Bank to Ba3 from Ba1, Piraeus Bank to Ba3 from Ba1, ATEbank to b1 from Ba2, and Attica Bank to b1 from Ba2.

Meanwhile, Moritz Kraemer, head of sovereign credit ratings for Europe at Standard & Poor’s has told Reuters Insider Television the agency is watching the outcome of the European Council talks as the shape of the European Stability Mechanism (ESM) which succeeds the current bailout fund is key to Greece’s credit rating. In a related development, Greece has filed for Diaspora bonds with the US Securities and Exchange Commission and has plans to tap Greeks in Australia at some stage. The issuing bonds to Greek Diaspora was also raised with Neos Kosmos by the Minister for Greeks Abroad Dmitri Dollis in his recent visit to Australia.

Main Source: Kathimerini, Athens News, Reuters