Fitch sees more confidence after Cypriot bank recap, but risks remain

International ratings agency Fitch said in a statement Tuesday that the completion of the recapitalization and restructuring process for the Cypriot banks should improve confidence and contribute to funding stability in the system.

However, the banks will remain vulnerable to funding and liquidity risks and exposed to intense asset quality and profitability pressures in the recession, so ratings are likely to stay deeply speculative-grade for some time.

Fitch expects the Cypriot economy to contract by 8.9 percent this year and by a further 4.9 percent next year. [Reuters]