Fitch Downgrades Largest Cypriot Banks

Fitch Ratings downgraded three large Cypriot banks on Tuesday, following an agreement reached at Eurogroup level in the early hours of Monday morning. The agency's press release says that it has downgraded "the Long- and Short-Term Issuer Default Ratings (IDRs) of Cyprus Popular Bank (CPB) to Default (D) and those of Bank of Cyprus (BOC) to Restricted Default (RD) from `B`, respectively, on losses imposed on senior creditors".

The fact that BOC will continue to operate in Cyprus, while CPB will be wound-down drives the difference in their Long-term IDRs (`RD` for BOC; `D` for CPB), it adds. The Support Rating Floors (SRF) of the two banks have been revised to `NF` from `B` and Support Ratings (SR) to `5` from `4` as a result of the bail-in of senior creditors. Fitch says.

Following this, it is added, Fitch has also downgraded their VR to `f` from `c`. It has further maintained the Rating Watch Negative (RWN) on Hellenic Bank's (HB) ratings except for its `cc` VR, which has been revised to Rating Watch Evolving (RWE) from RWN. Fitch, points out that it "expects enforcement of losses on BOC`s uninsured deposits to be material as the bank will have no access to state capital aid under the EUR10 billion rescue package".