Standard & poor’s downgrades cyprus’ credit rating

Standard & Poor’s cut Cyprus’ long-term sovereign credit rating by a notch to ‘BBB’ from ‘BBB+’ yesterday, referring to the banking system’s exposure to the Greek sovereign debt.

In its press release, Standard & Poor’s said “In our opinion, the contingent liabilities posed to the Cypriot government by the Cypriot banking system’s exposure to Greece continue to weigh heavily on the ratings on Cyprus.”

“We believe that a Greek default scenario with private sector involvement (PSI) or “haircuts” higher than previously agreed by commercial creditors would necessitate the recapitalization of some domestic banking institutions.”

“We also believe the effect of a Greek government default could reverberate through Cyprus’ economy in the form of private-sector funding costs increasing beyond our previous expectations, thereby reducing investment and overall domestic demand.”

 Source: Cyprus-Property-Buyers.com