Fitch Ratings put the rating of the three biggest banks in Cyprus on watch for a possible downgrade on Monday, citing the risks of a Greek euro exit.
Bank of Cyprus Pcl, Cyprus Popular Bank Pcl and Hellenic Bank Pcl were placed on ?rating watch negative? to reflect the fact that Cypriot banks remain ?highly sensitive to heightened risks in Greece, particularly if Greece was unable to sustain? membership of the euro, according to a statement by the ratings company.
If new Greek general elections on June 17 ?fail to produce a government with a mandate to continue with the EU-IMF program of fiscal austerity and structural reform, an exit of Greece from EMU would be probable and this would likely result in widespread default on private sector as well as sovereign euro-denominated obligations,? Fitch said. ?While the propensity of the Cypriot government to support Cypriot banks remains unchanged, its ability would largely depend by the scale of the problems derived from Cypriot banks? Greek operations.? [Bloomberg]