The collapse of British tour operator Thomas Cook is “credit negative” for Greek and Cypriot banks because it reduces the cash flow of businesses in the tourism sectors of these countries, ratings agency Moody’s said in a report on Thursday.
This development will result in a reduction in tourism revenue and investment in the two countries, the report said, adding that it may even lead to business closures. It could also affect other sectors linked to tourism, such as transport and trade.
Moody’s said the exposure of Greek banks to businesses (hotels and restaurants) that worked with the bankrupt company was 10.8 percent, and 13.9 percent for Cypriot lenders at the end of March 2019.
The firm recommends that immediate action be taken by the Greek government to mitigate the impact and notes that a positive development would be the replacement of Thomas Cook by another travel agency in the coming months.
Greek banks are already struggling to deal with a pile of non-performing loans. The ratings agency said the same problem will affect banks in Bulgaria.