S&P downgrades Greek banks, eyes default within a year

PARIS (AFP) - Standard & Poor's lowered the rating of Greece's biggest four banks on Friday, two days after cutting its already deep-junk rating for Greek bonds.

Alpha Bank, Eurobank, the National Bank of Greece and Piraeus Bank saw their rating drop from CCC+ to CCC, S&P said in a statement.

"The downgrade reflects our view that Greek banks will likely default within the next 12 months in the absence of an agreement between the Greek government and its official creditors while the end of the extension of the current program is approaching," the ratings agency said.

"In this context, we see increasing likelihood that capital controls will be imposed to staunch further deposit outflows."

S&P said Greek banks had suffered from plummeting deposits as panicked Greeks withdraw their money, with 20 per cent of total deposits, around €35 billion (S$53 billion) lost between the end of November 2014 and the end of April 2015.

S&P added that the banks' negative outlook reflects the possibility that it could lower their ratings again "if we anticipate that capital controls will be put in place or that the European authorities will no longer offer support to Greek banks."

S&P had already lowered Greek bonds from CCC+ to CCC on Wednesday after the cash-strapped country delayed a debt payment to the International Monetary Fund last week.

Sources said Friday that euro zone officials have discussed the possibility of a dreaded Greek default if it fails to reach a debt deal, piling further pressure on Athens to seal an agreement with its EU-IMF creditors and avoid crashing out of the euro.

The Athens stock market dropped 6 per cent after it emerged that senior euro zone officials meeting in Bratislava on Thursday had war-gamed "worst-case" scenarios of Greece not being able to pay its bills.