International rating agency Standard & Poor’s has lowered Cyprus’ sovereign credit rating by one notch with a negative outlook, citing the island state’s significant exposure to Greece.
In a statement released on Wednesday, Standard & Poor’s said it has cut Cyprus’ long-term sovereign credit rating to A- from A and the short-term rating to A-2 from A-1. The outlook on the ratings remains negative.
“Standard & Poor’s views the Cypriot financial system‘s significant exposure to the Hellenic Republic as a ratings weakness for Cyprus in the context of the deterioration in the creditworthiness of the Greek government and the Greek financial sector,” the statement said.
“In our view, the increasing likelihood that the Greek government will restructure its debt heightens the risk that a significant portion of the Cypriot government’s large financial sector contingent liabilities will become explicit liabilities migrating to the Cypriot government’s balance sheet,” it quoted credit analyst Benjamin Young as saying.