19/01/2011 10:02
The US credit rating agencies that watch the Cypriot economy tracked down three different danger spots for the credit rating of Cyprus in 2011. The Cypriot ratings in the next few months will depend on the persuasiveness of the efforts to adopt structural changes in the economy, the course of the Greek economy and the robustness of the banks.
Banking robustness
In November, Standard and Poor’s proceeded with the downgrading of Cyprus from A+ to A with negative outlook. S&P was exceptionally concerned about the size of the banking sector together with the problems in Greece.
According to S&P, Cyprus’s ratings could have been pushed downwards if the credit risks and the NPL’s – especially in Greece – increased.
S&P are worried for the exposure of the banks to Greek bonds and loans and they stress that their future moves will depend on the quality of the banks’ assets.
They are concerned about the big size of the banks, which in case of an emergency, they will make the efforts to support the banks more difficult.
Structural weaknesses
On January 13, Moody’s warned that they will downgrade Cyprus, possibly by more than a notch, and expressed their concerns on the middle-term course of the public debt, which was shot in the past few years.
The agency revised the ratings of the Cypriot bonds for possible downgrading (Aa3), stressing that the measures taken by the government do not solve the structural fiscal problems of the country. Moody’s were convinced that the government will achieve its target for the reduction of the deficit but noted that the middle-term fiscal challenges are still here.
The main factor that well be re-examined by the firm is Cyprus’s ability to reverse the recent worsening of the public finances.
Moody’s are also concerned about the exposure of the banking sector to Greece, but not as much as S&P.
On Monday, Fitch placed the credit rating of Cyprus to AA- with negative outlook, giving a deadline until April for the taking of structural measures for the pension system. The downgrading will be of a notch and for the first time it is related to that of Greece.
Unlike the other two agencies, Fitch believe that the connection of Cyprus with Greece does not focus on banks only but also on the wider economy.
Fitch’s report will focus on the middle-term risks that Cyprus faces from the economic, financial and banking risks that emerge due to its relation with Greece (BB, negative prospects).
Unlike Moody’s and S&P, Fitch do not give emphasis to the banks by they referred to the structural problems of Cyprus, the state pensions mostly.
Banking robustness
In November, Standard and Poor’s proceeded with the downgrading of Cyprus from A+ to A with negative outlook. S&P was exceptionally concerned about the size of the banking sector together with the problems in Greece.
According to S&P, Cyprus’s ratings could have been pushed downwards if the credit risks and the NPL’s – especially in Greece – increased.
S&P are worried for the exposure of the banks to Greek bonds and loans and they stress that their future moves will depend on the quality of the banks’ assets.
They are concerned about the big size of the banks, which in case of an emergency, they will make the efforts to support the banks more difficult.
Structural weaknesses
On January 13, Moody’s warned that they will downgrade Cyprus, possibly by more than a notch, and expressed their concerns on the middle-term course of the public debt, which was shot in the past few years.
The agency revised the ratings of the Cypriot bonds for possible downgrading (Aa3), stressing that the measures taken by the government do not solve the structural fiscal problems of the country. Moody’s were convinced that the government will achieve its target for the reduction of the deficit but noted that the middle-term fiscal challenges are still here.
The main factor that well be re-examined by the firm is Cyprus’s ability to reverse the recent worsening of the public finances.
Moody’s are also concerned about the exposure of the banking sector to Greece, but not as much as S&P.
On Monday, Fitch placed the credit rating of Cyprus to AA- with negative outlook, giving a deadline until April for the taking of structural measures for the pension system. The downgrading will be of a notch and for the first time it is related to that of Greece.
Unlike the other two agencies, Fitch believe that the connection of Cyprus with Greece does not focus on banks only but also on the wider economy.
Fitch’s report will focus on the middle-term risks that Cyprus faces from the economic, financial and banking risks that emerge due to its relation with Greece (BB, negative prospects).
Unlike Moody’s and S&P, Fitch do not give emphasis to the banks by they referred to the structural problems of Cyprus, the state pensions mostly.
Related Articles
