Moody's Downgrades Greek Banks Operating in Bulgaria

Moody's Investor Service has downgraded Greek banks after slashing the country's sovereign rating by three-notches. File photo

International agency Moody's has lowered the credit ratings of six Greek banks, four of which have operations in Bulgaria.

The move comes just days after the agency slashed the country's sovereign rating by three-notches and affects the deposit and debt ratings of National Bank (NBG), which owns the United Bulgarian Bank (UBB), EFG Eurobank, which runs the Bulgarian PostBank, Alpha Bank and Piraeus Bank, which also operate in Bulgaria, ATEbank and Attica Bank.

The outlook on all these ratings is negative.

Explaining its 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 percent of their balance sheet.

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