Standard & Poor΄s has cut Cyprus΄ government debt grade by one notch, as it viewed the Cypriot financial system΄s “significant” exposure to debt-saddled Greece as a “ratings weakness.”
The ratings agency downgraded Cyprus’s rating to “A-“ from “A” and kept a negative outlook, which means it could issue another downgrade.
“The increasing likelihood that the Greek government will restructure its debt heightens the risk that a significant portion of the Cypriot government΄s large financial-sector contingent liabilities will become explicit liabilities migrating to the Cypriot government΄s balance sheet,” S&P credit analyst Benjamin Young said.
S&P said the rating could be lowered again if it perceives increased credit risks in Cyprus΄ financial system, demonstrated by further credit conditions in either its or Greece΄s funding base.
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