International press reports continued to scrutinize the banking index's slide at the Athens Stock Exchange over the past few sessions, especially in the wake of "Black Wednesday" last week, with a report by Fitch Solutions also prominently featured in Monday's dispatches.
Reuters cited a statement in Fitch report noting that “... the creation of an asset protection scheme, in which the Greek government provides insurance for the sector’s bad debts, would go some way to stem the sell-off in Greek bank shares, were it to not require any losses from private sector investors ... Such a situation would shift risks from the Greek banking sector to the Greek government,” it added.
The ratings firm also warned that "....any depletion of Greece’s own funding buffer or a solution that may involve government funding over the coming years would likely bring its own fiscal position into focus ... It remains our core view that Greece will meet its primary budget surplus targets of 3.5 percent of GDP in 2018 and 2019, however a banking sector bailout would pose major downside risks to this view."
On the same day, Fitch Ratings said it updated its Covered Bonds Rating Criteria to revise the Refinancing Spread Level (RSL) assumptions for "Greek cover assets as a consequence of the upgrade of Greece's Country Ceiling to 'BBB-' from 'BB-' ".
The statement underlined:
"RSL for Greek residential mortgage loans are now set to 450 bp in a 'B' rating scenario and to 600 bp in a 'BBB-' rating scenario, both down from 800 bp previously. Another amendment clarifies that a rating committee determines whether the conditions are met for carrying forward previous results of Fitch quantitative asset and/or cash flow analysis. No rating impact is expected from these changes."
