Moody's examines for lowering ratings on three Greek banks

4 November 2009 AcaeaEURoe Moody's has put on downgrade review certain ratings on Greece's National Bank of Greece (ATH:ETE), EFG Eurobank Ergasias SA (ATH:EUROB) and Alpha Bank AE following a similar action on the sovereign.

Specifically, the move affected the following ratings on the banks and their units:

National Bank of Greece Aa3 local and foreign currency deposit ratings

National Bank of Greece A2 preferred stock rating

National Bank of Greece Aa3 backed (government-guaranteed) debt

NBG Finance plc

Aa3 backed senior unsecured debt rating

NBG Finance plc

A1 backed subordinated debt rating

National Bank of Greece Funding Ltd.....A2 backed preferred stock rating

EFG Eurobank Ergasias SA

A1 long-term deposit rating

EFG Eurobank Ergasias SA

A1 backed (government-guaranteed) debt

EFG Hellas Plc

A1 backed senior unsecured debt rating

EFG Hellas Plc

A2 backed subordinated debt rating

EFG Hellas (Cayman Islands) Ltd A1 backed senior unsecured debt rating

EFG Hellas (Cayman Islands) Ltd A2 backed subordinated debt rating

EFG Ora Funding Limited II

A1 backed senior unsecured debt rating

EFG Hellas Funding Ltd

A3 backed preferred stock rating

Alpha Bank SA

A1 backed (government-guaranteed) debt

The move reflects the downgrade review placement of Greece's A1 foreign and local currency ratings.

The agency previously used the local currency deposit ceiling, which is Aaa for Greece, as the main factor in evaluating the capacity of a central government to back a country's banks. Yet, the agency's new methodology assumes greater significance of a government's local currency debt rating in assessing its ability to extend systemic backup.

The anchor used for gauging the Greek government's capacity to provide systemic support is now its A1 bond rating, on downgrade review, plus a one-notch uplift, resulting in a Aa3 input, Moody's said. The agency notes that this "ability to support indicator" captures the worsening of the government's fiscal position, with indebtedness of over 108% of the gross domestic product (GDP) and a growing fiscal deficit, which could erode its capacity to allocate resources and back the banking system.

"The current rating action reflects the likelihood that a downgrade of the government's ratings would lead to a downgrade of the ability to support indicator, which could, in turn, result in a downgrade of the ratings benefiting from uplift: deposit and debt ratings of National Bank of Greece, EFG Eurobank Ergasias and Emporiki Bank," Moody's said. The agency stressed that Emporiki Bank's ratings were already on review for possible downgrade due to its deteriorating financial performance.

The government-guaranteed bonds of Alpha Bank AE were also affected, as the backed A1 rating is aligned with the current rating for Greece, the agency said. Thus, the rating was also placed on review for possible downgrade.

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