Moody’s downgraded covered bonds issued off a Eurobank Ergasias programme yesterday (Tuesday) and put all other Greek programmes it rates on review for downgrade, after having cut the ratings of five Greek banks on Monday and put Greece’s Caa1 sovereign rating on negative review on Friday.

Mortgage covered bonds issued off Eurobank Ergasias’s Covered Bonds I programme were downgraded to B2, and placed on review for downgrade, after the issuer’s Caa2 rating was cut to Caa3 and put on review for downgrade.

Its Covered Bonds II programme was also put on review for downgrade, as were two programmes of National Bank of Greece (NBG) and one of Alpha Bank AE after the banks were downgraded from Caa1 to Caa2 and left on review for downgrade.

“Today’s bank rating downgrades are driven by Moody’s view of a reduced likelihood of systemic support given 1) the heightened uncertainty about the government’s ability to come to an agreement with official creditors in time to meet its own liquidity and funding needs, and 2) the likely reduction in the Hellenic Financial Stability Fund’s (HFSF) capacity to support the banks in case of need,” said Moody’s.

“The rating review will assess the acute funding and liquidity pressures facing these banks. In addition, the review will assess banks’ direct exposure to the sovereign and the impact of the weakened operating environment on asset quality and solvency.”

Eurobank Ergasias’s other programme is rated B3, while NBG’s Global Covered Bonds programme is rated B1 and its Covered Bonds II programme Ba3, and Alpha Bank’s Direct Issuance Programme is rated B1. All of the covered bonds are mortgage backed.

“During the rating review Moody’s will examine whether the Timely Payment Indicator (TPI) framework caps the covered bond ratings at a lower level and to which extent the issuers will provide sufficient levels of overcollateralisation (OC), as appropriate in voluntary and/or committed form,” it said.