Moody's Investors Service on Tuesday lowered its ratings on two Cypriot banks, citing their increased exposure to Greece and their capital positions' vulnerability to a possible Greek exit from Eurozone.
Moody's said it has cut the deposit ratings of the Bank of Cyprus to B2 from B1 and of Hellenic Bank to B1 from Ba3. Both the banks' ratings were placed on review for downgrade.
The B3 senior unsecured debt and deposit ratings of Cyprus Popular Bank were placed on review for downgrade. Moody's will also re-assess the bank's standalone credit assessment of caa1 during the review period.
The rating agency said the actions on the banks reflected the increased risk of a Greek exit from the euro area. Moody's said the banks' extensive operations in Greece rendered their capital positions vulnerable to such an event.
Speculations are rife that Cyprus may be the next euro member of seek a bailout from EU. Cyprus government spokesman Stefanos Stefanou reportedly said Tuesday that the government is considering seeking an EU bailout to recapitalize its banks, though no decision has been made in this regard. Elsewhere, Fitch Ratings lowered the ratings of 18 Spanish banks on Tuesday, after downgrading the country's two major banks on Monday.
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