Seven Portuguese banks downgraded - Taipei Times

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," the agency's statement said.

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 IMF and EU 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," a Bank of Portugal statement said.