Cyprus rating cut because of Greek exposure
Fitch rating agencycut Cyprus’s sovereign credit rating yesterday from AA-to A-and is warning of another possible downgrade because of its banking sector’s large exposure to Greece.
“The downgrade reflects the severity of the crisis in neighboring Greece and the risk this poses for the Cypriot banking system and consequently the public finances of Cyprus,” said Chris Pryce, director at Fitch’s Sovereign Group, in a statement.
The agency said around one-third of the banking system’s assets are booked as Greek exposure, including that of Greek bank subsidiaries based on the island.
Despite the downgrade, Fitch said that Cypriot banks remained “relatively well placed” to absorb losses on their Greek debt.
Fitch’s move follows similar downgrades by the rating agencies Moody’s and Standard and Poor’s in recent months based on similar concerns.