Moody’s credit rating agency issued two credit downgrades in the crisis-hit eurozone yesterday, marking down leading Greek banks by two notches and Slovenian debt by one notch.
The agency downgraded the main Greek banks by two notches, citing increased risks of losses on their holdings of Greek debt.
Moody’s Investors Service also warned of an increased prospect that the Greek economy would worsen and said that private holders of Greek debt, meaning banks, might suffer further losses.
It also downgraded the rating of Slovenia’s sovereign debt by one notch, warning of an increased risk that the government might have to intervene again to support the banking system.
NEGATIVE OUTLOOK
Moody’s Investors Service cut Slovenia’s rating from “Aa2” to “Aa3” and also placed the country’s debt on negative outlook, meaning that it could cut the rating again after further analysis.
These downgrades, as the eurozone debt crisis worsens raising deep concerns about the strength of some banks, follow downgrades by Standard & Poor’s in Italy this week, first downgrading Italian sovereign debt and then seven top Italian banks.
The Greek banks downgraded yesterday were National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, the Agricultural Bank of Greece and Attica Bank.
A subsidiary of French bank Credit Agricole, called Emporiki bank, and a subsidiary of French bank Societe Generale, called Geniki, suffered less and were attributed ratings of “B3” instead of “B1.”
UNDER REVIEW
All of the ratings had been placed under review on July 25 for a possible downgrade.
Moody’s said its decision had been motivated by a recent fall in the value of Greek bonds held by these banks. It warned that there was a rising risk of “significant” further losses on these holdings.
It was also likely that the amount of doubtful loans on the books of these banks would rise with the crisis, particularly because new losses could emerge as a result of audits by the central bank and external experts, Moody’s said.
Regarding Slovenia, the agency pointed to “increasing risk that the government may be called upon to provide additional support to the banking system.”
“The ongoing financial crisis has exposed vulnerabilities in the banking system’s asset quality, capital adequacy and short-term external funding model,” it said.
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