ECONOMY

S&P cuts rating on Cyprus

Ratings agency Standard and Poor’s (S&P) downgraded Cyprus’s sovereign rating by one notch to A yesterday, citing risks to public finances from the country’s financial system. S&P also lowered the country’s outlook to negative. «The downgrade reflects our opinion of increased vulnerabilities from embedded credit risk of the Cypriot financial system’s external assets and domestic loan book and the impact these could ultimately have on public finances,» said S&P credit analyst Benjamin Young in a statement. Cyprus’s financial system, whose assets are more than seven times the size of the country’s annual gross domestic product, is exposed to Greek customers and Greece’s state debt while much domestic credit is collateralized by property assets, which have suffered a decline in value over the last two years.