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Fitch Downgrades Greek Banks to ‘Restricted Default’ on Capital Controls

Credit ratings agency FITCH downgraded Greek banks to Restricted Default (RD) on Capital Controls imposed on Monday, June 29th 2015.

FITCH STATEMENT:

“Fitch Ratings has today downgraded Greece-based National Bank of Greece S.A. (NBG), Piraeus Bank, S.A. (Piraeus), Eurobank Ergasias S.A. (Eurobank) and Alpha Bank AE’s (Alpha) Long- and Short-term Issuer Default Ratings (IDRs) to ‘RD’ from ‘CCC’ and ‘C’, respectively. Fitch has also downgraded these banks’ Viability Ratings (VRs) to ‘f’ from ‘ccc’. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS IDRS AND SENIOR DEBT RATINGS The IDR downgrades follow the announcement by the Greek authorities on 28 June 2015 to impose extended bank holidays and capital controls, mainly including restrictions on deposit withdrawals in Greece, which Fitch views as a restricted default (‘RD’), because the deposit restrictions affect a material part of the banks’ senior obligations. The banks’ senior unsecured long-term debt ratings have been downgraded to ‘C’/’RR6’ from ‘CCC’/’RR4′. The ratings reflect exceptionally high levels of credit risk, because of the imposition of capital controls as well as poor recovery prospects in the event of the default on senior debt obligations, due to very weak asset quality and high levels of preferred liabilities and asset encumbrance. VRS The downgrade of NBG’s, Piraeus’, Eurobank’s and Alpha’s VR to ‘f’ from ‘ccc’ reflects Fitch’s view that these banks have failed and would have defaulted had capital controls not been imposed, given the high rates of ongoing deposit withdrawal and the ECB’s decision on 28 June 2015 not to raise the Bank of Greece’s Emergency Liquidity Assistance (ELA) ceiling. SUPPORT RATING AND SUPPORT RATING FLOOR Greek banks’ Support Rating of ‘5’ and SRF of ‘No Floor’ highlight our view that support from the state cannot be relied upon, mainly given the limited resources at Greece’s disposal. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Greek banks’ subordinated debt and other hybrid capital have been affirmed at ‘C’/’RR6′ and reflect exceptionally high levels of credit risk, including poor recovery prospects. Hybrid capital is currently not performing. RATING SENSITIVITIES IDRS, VRs AND DEBT RATINGS These banks’ IDRs, VRs and senior and subordinated debt ratings are unlikely to be upgraded until capital controls are materially eased. Recovery Ratings are sensitive to the overall approach taken by the authorities to address the banking system’s challenges, including any resolution tools that might be applied and the valuation and availability of free assets. Hybrid ratings would need to become performing again for there to be any possibility of an upgrade. SUPPORT RATING AND SUPPORT RATING FLOOR The banks SRs and SRFs are unlikely to change, given Greece’s limited capacity to support its banks.”

For Banks rating actions see REUTERS

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One comment

  1. May I remind you that
    FINCH RATINGS AGENCY WAS THE BRAINSTORM OF THE INTERNATIONAL BANKS.
    A VOICE TO BACKUP THE BANKS CREDIBILITY
    FINCH IS FUNDED BY THE INTERNATIONAL BANKS
    FINCH TAKES ORDESR FROM & IS OBEDIENT TO THE INTERNATIONAL BANKS.
    Therefore the are CROWD HIRE & nothing less.