S&P warns Romania on rating downgrade due to Greece’s risks

Standard and Poor’s (S&P) warned on Wednesday it might downgrade the credit ratings of countries in Southeast Europe, including Romania, along with Bulgaria, Macedonia, Albania and Serbia, if the troubles of Greece spill over into their banking systems.

Greek banks own ‘systemically important’ banks in these south-east European countries and the worry is that if Athens were forced out the euro zone, its lenders would become bankrupt, with a domino effect on their subsidiaries, agerpres.ro informs, quoting reuters.com.

“We don’t rule out the possibility of government support (for banks),” S&P said in a report. “If such support substantially weakens governments’ fiscal and debt metrics, this could weigh negatively on our sovereign ratings.”

Greece’s Alpha Bank has the biggest geographic spread across the region with arms in Romania, Bulgaria, Serbia, Albania and Macedonia. Eurobank Ergasias and Piraeus Bank are both in Romania and Bulgaria with the former also in Serbia.

The rating agency notes that the banks may raid subsidiaries for their best assets in a fight for survival and central bank efforts to ring fence them may be unable to stop runs on deposits.

S&P currently rates Romania BBB- with a stable outlook, Bulgaria at BB+ – stable, Macedonia BB- stable, Albania B positive and Serbia BB- with a negative outlook.

It estimates that the market shares of the Greek banks’ subsidiaries’ range from about 15 percent of total financial system assets in Romania and Serbia to more than 20 percent in Bulgaria and Macedonia.

Alpha Bankassetsbankrupteuro zoneEurobank Ergasiasfinancial systemGreek bankspiraeus bankrating agencyrisksRomaniastable outlookStandard and Poor's (S&P)
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