Moody's downgrades rating of seven Portuguese banks
Moody's ratings agency downgraded the standing of seven Portuguese banks despite the fact that they had passed Friday's stress tests conducted by the European Banking Authority.
It said the decision had been determined by the lowering of Portugal's national debt to junk status earlier this month.
Those banks hit in Friday's ratings downgraded included Caixa Geral de Depositos (CGD), which was dropped to Ba1; Banco Espirito Santo (BES), which dropped to Ba1; and Espirito Santo Financial Group (ESFG), which was downgraded to Ba2.
Banco Comercial Portugues (BCP) fell to Ba1; Banco BPI (BPI) fell to Baa3; and Banco Santander Totta (BST) dropped to Baa1.
Finally, Caixa Economica Montepio Geral was downgraded to Ba2.
"Moody's downgrade of... Portugal to Ba2... implies a weakened ability of the Portuguese government to support its banking system," said the agency's statement.
Last week, cut Portugal's 10-year sovereign debt by four notches to Ba2 causing Portuguese bond yields to hit record levels and a political uproar in eurozone capitals.
It also slashed its rating of debt held by Banco Espirito Santo (BES) and Caixa Geral de Depositis (CGD) three notches from Baa1 to Ba1, and knocked the debt of private banks Millennium BCP and Banif down four notches to Ba2.
It said it estimated that Portugal, like Greece, would need a second debt bailout beyond the joint International Monetary Fund and European Union rescue it received in May.
On Friday, the Bank of Portugal said the four main Portuguese banks had passed EU stress tests, adding that two biggest private banks in the country, BCP and BES banks, had to "raise capital or sell assets" within three months.
"All the Portuguese banking groups have shown themselves capable of absorbing a combination of particularly serious economic and financial shocks that one can expect in a crisis scenario," said a Bank of Portugal statement.
© 2011 AFP