Overview -- On Feb. 27, 2012, we lowered our long- and short-term sovereign credit ratings on Greece to 'SD' (selective default). -- We believe that rated Greek banks are likely to incur sizable losses on their Greek government bond portfolios upon completion of Greece's recently launched exchange offer. -- However, we read the Greek authorities' public statements as indicating that sufficient public funds should be available to address immediate potential capital and liquidity shortfalls. -- We are therefore affirming our 'CCC/C' long- and short-term ratings on the four banks that we rate--National Bank of Greece S.A., EFG Eurobank Ergasias S.A., Alpha Bank A.E., and Piraeus Bank S.A. -- The negative outlooks reflect the possibility that we could further lower the long- and short-term ratings on all four banks if we believe they will default on their obligations, as defined by our criteria. Rating Action On March 2, 2012, Standard & Poor's Ratings Services affirmed its 'CCC/C' long- and short-term counterparty credit ratings on four Greek banks--National Bank of Greece S.A. (NBG), EFG Eurobank Ergasias S.A. (EFG), Alpha Bank A.E. (Alpha), and Piraeus Bank S.A. (Piraeus). We have also affirmed our 'CC' issue ratings on their hybrid securities. The outlooks on the long-term ratings on the four banks are negative. Rationale The affirmations follow our downgrade of the Hellenic Republic (Greece) to 'SD', on Feb. 27, 2012. Our downgrade of Greece was partly based on the Greek government's bond exchange offer launched last week, which we believe will likely lead to sizable losses for rated Greek banks. That said, based on Greek government and EU authorities' public statements, we believe that sufficient public funds should be available to recapitalize all the banks and enable them to comply with regulatory capital requirements. The rating actions also reflect our expectation that these banks' funding capacity and liquidity position will likely not further deteriorate, based on the European Council's statement that Greek banks will continue to receive financial support. Such support in our view should allow these banks to maintain eligible collateral for discounting through European liquidity support mechanisms, including the Emergency Liquidity Assistance (ELA) set up at the Bank of Greece, even if the relevant ratings on Greek sovereign debt are lowered to 'D' (default). We assess the stand-alone credit profiles (SACPs) for all four banks at 'cc'. Our 'CCC' long-term ratings on these banks show a two-notch differential from their respective SACPs, indicating the uplift we factor in for extraordinary liquidity support provided by EU authorities. On Feb. 24, 2012, the Greek government launched an exchange offer on its outstanding sovereign bonds. According to the publicly available terms of the swap, while the nominal value haircut on the bonds will account for about 53.5%, we currently estimate that the net present value potential losses could be significantly higher and potentially reach a total of about 65%-75% of the nominal initial value. In our view, the Greek banks we rate are directly and significantly exposed--to varying degrees--to Greek country risk through these rated banks' large government bond portfolios. We therefore believe that these banks will likely incur sizable losses on their government bond holdings upon completion of the deal, which would, in our view, substantially impair their capital bases. According to Greek and EU authorities' public statements, however, public funds will be made available to recapitalize all Greek banks if needed. In this context, we understand that the European Central Bank (ECB; AAA/Stable/A-1+), the International Monetary Fund (IMF), and EU authorities have already allocated a total of EUR30 billion from the "first aid" package provided to Greece to cover the banks' capital needs. Moreover, according to Greek government public statements, we think that the total recapitalization fund could be enhanced by an additional EUR10 billion to foster its capacity to support banks under stress. Based on these statements, we have taken the view that these facilities should backstop these banks' ability to continue meeting their respective regulatory capital requirements once losses arising from their Greek government bond portfolios are recognized. Our ratings also reflect our view that Greek banks should be able to continue pledging Greek sovereign debt collateral eligible for discounting at European funding facilities--including the ELA set up at the Bank of Greece-- even if the relevant ratings on Greek sovereign debt are lowered to 'D' (default) (see "Greece Ratings Lowered To 'SD' (Selective Default)," published Feb. 27, 2012). We base our opinion on the European Council's statement that it will offer credit enhancement to underpin the quality of pledged Greek sovereign debt and therefore allow continued use of that collateral by Greek banks to access European liquidity facilities. Our current ratings on the four Greek banks continue to factor in a 'b+' anchor, which draws on our Banking Industry Country Risk Assessment (BICRA) methodology and our view on both the economic risk of the main countries where they operate and the industry risk of Greece, where the banks are incorporated. They also reflect our view of the banks' "adequate" business position, "weak" capital and earnings, "weak" risk position, "average" funding, and "very weak" liquidity, as our criteria define these terms. Outlook The negative outlooks reflect the possibility that we could downgrade EFG, Alpha, Piraeus, or NBG, if we believe they will default on their obligations, as defined by our criteria. Taking into consideration what we see as a meaningful possibility of default, there is an inherent CreditWatch with negative implications associated with our 'CCC' long-term ratings (see "How Standard & Poor's Uses Its 'CCC' Rating," published Dec. 12, 2008). We could lower the ratings on the four banks if their access to liquidity support from extraordinary mechanisms set up by EU authorities, including the ELA discount facility, is impaired for any reason, given that this support currently underpins the banks' capacity to meet their financing requirements. In this context, we also note that persistently high pressure on banks' retail funding bases may lead to further deposit outflows, which could in our opinion increase the need for Greek banks to receive additional extraordinary liquidity support from European authorities. Should the banks' access to the abovementioned liquidity support deteriorate, we would conclude that the four banks are likely to default as defined under our criteria. We could also lower the ratings on the four banks if we believe they are likely to default, as defined by our criteria, due to any developments associated with a substantial impairment of their solvency. This could happen if, for any reason, Greek banks cannot access external capital support, or if we consider such support as insufficient to allow the banks to continue meeting regulatory capital requirements once the potentially large losses on their holdings of Greek government bonds are recognized or the potentially sizable credit impairments arising from lending portfolios are taken into account. The outlooks could be revised to stable if the risks we see to all four banks' financial profiles abate, and if we perceive that extraordinary financial support will likely enable them to survive without defaulting on any of their obligations. Ratings List Ratings Affirmed NATIONAL BANK OF GREECE National Bank of Greece S.A. Counterparty Credit Rating CCC/Negative/C Certificate Of Deposit CCC/C Preference Stock CC NBG Finance PLC Subordinated* CC National Bank of Greece Funding Ltd. Preferred Stock* CC *Guaranteed by National Bank of Greece S.A. PIRAEUS BANK Piraeus Bank S.A. Counterparty Credit Rating CCC/Negative/C Certificate Of Deposit CCC/C Piraeus Group Capital Ltd. Preferred Stock* CC Piraeus Group Finance PLC Senior Unsecured* CCC Subordinated* CC Commercial Paper* C *Guaranteed by Piraeus Bank S.A. ALPHA BANK Alpha Bank A.E. Counterparty Credit Rating CCC/Negative/C Certificate Of Deposit CCC/C Alpha Credit Group PLC Senior Unsecured* CCC Subordinated* CC Commercial Paper* C Alpha Group Jersey Ltd. Junior Subordinated* CC Preferred Stock* CC Preference Stock* CC *Guaranteed by Alpha Bank A.E. EFG EUROBANK ERGASIAS EFG Eurobank Ergasias S.A. Counterparty Credit Rating CCC/Negative/C Certificate Of Deposit CCC/CC EFG Hellas (Cayman Islands) Ltd. Senior Unsecured* CCC EFG Hellas Funding Ltd. Preference Stock* CC EFG Hellas PLC Senior Unsecured* CCC Subordinated* CC Commercial Paper* C EFG Ora Funding Limited III Senior Unsecured* CCC *Guaranteed by EFG Eurobank Ergasias S.A.