S&P Cuts Ratings on Four Greek Banks to 'SD' (NBG)

Standard & Poor's Ratings Services today said that it has lowered its long- and short-term counterparty credit ratings on Alpha Bank A.E., Eurobank Ergasias S.A., National Bank of Greece S.A. (NYSE: NBG), and Piraeus Bank S.A. to 'SD' (selective default) from 'CCC/C'. We have also lowered our issue ratings on the banks' senior unsecured debt to 'CCC-' from 'CCC'. We have affirmed our 'C' subordinated debt ratings on the four institutions.

The downgrades to 'SD' follow the measures introduced by the Greek government on Monday June 29. Specifically, these include limits to deposit withdrawals, the closure of bank branches for a full working week, and the prohibition of money transfers out of Greece unless authorized by the Greek Ministry of Finance. The rating actions reflect our opinion that private individuals' lack of access to their deposits on a timely and in-full basis, and the constraints to their ability to transfer funds, constitute a selective default under our criteria. Our downgrade of all outstanding senior unsecured notes to 'CCC-' reflects our opinion that it is now inevitable that Greek banks will default within six months in the absence of support from the EU authorities; we do not anticipate such support will be forthcoming.

Following the interruption of negotiations between the international authorities and the Greek government, the ECB announced on June 28 that it is maintaining the emergency liquidity assistance it provides to Greece's banks at the level set on June 26, around €89 billion. In our opinion, this has left the Greek banks with very limited liquidity buffers to cover their upcoming needs, taking into account the large deposit withdrawals they have experienced in recent weeks.

The Greek authorities have consequently decided to impose restrictions on the banks, such that:

• All banks will remain closed until July 6.
• Individual Greek depositors can withdraw a maximum of €60 per day, per card, in cash (although funds deposited can be used a means of payment via electronic transfer or using credit and debit cards).
• Cross-border transfers through banks are prohibited, unless authorized by the Greek Ministry of Finance.

We understand the finance minister could further extend, or shorten, bank closures.

We view the banks' liquidity positions as having weakened further after these recent events, which we see as constraining the banks' ability to meet their upcoming financial obligations, when due. We therefore believe the default of the Greek banks is a virtual certainty unless unexpected additional external support materializes. As such, we have revised down our stand-alone credit profile for all the four Greek banks to 'cc' from 'ccc-'.

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