Overview -- On Dec. 18, 2012, we raised our long- and short-term sovereign credit ratings on Greece to 'B-/B' from 'SD' (selective default). -- Although we believe that sovereign creditworthiness benefits from the strong determination of the eurozone to restore Greek economic stability and preserve its eurozone membership, we believe that the four Greek banks we rate are likely to continue facing significant risks to their weak financial profiles. -- We are therefore affirming our 'CCC' long-term and 'C' short-term ratings on National Bank of Greece, Eurobank Ergasius, Alpha Bank, and Piraeus Bank. -- The negative outlook reflects our view that we might lower the ratings on any of the four rated Greek banks because we believe there is still a one-in-three probability that they could default on their obligations. Rating Action On Dec. 20, 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), Eurobank Ergasias S.A (Eurobank), Alpha Bank A.E., and Piraeus Bank S.A. The outlook on the long-term ratings on all four banks is negative. At the same time, we affirmed our 'CC' issue rating on all four banks' hybrid securities. Rationale The affirmation follows our upgrade of the Hellenic Republic (Greece) to 'B-/B' from 'SD' on Dec. 18, 2012. The sovereign action reflectd the benefits from the completion on Dec. 17, 2012, of Greece's distressed debt buyback in tandem with approval by the finance ministers of EU member states belonging to the eurozone of a loan disbursement to Greece under the second economic adjustment program. We view the eurozone member states' decision to provide material cash flow relief to Greece as indicative of their determination to restore stability to Greek finances, and to preserve Greece's eurozone membership. Nevertheless, we think that the deteriorated financial profiles of the Greek banks we rate remain vulnerable to what we view as persistently high risk in their domestic economy. While capital and liquidity support from the authorities should allow the banks to continue complying with regulatory requirements, we believe that this support is unlikely to be sufficient to completely neutralize the impact of the weak operating and economic environment on our view of the banks' creditworthiness. We are maintaining our assessment of all four banks' stand-alone credit profile (SACP) at 'cc'. The long-term rating on NBG, Eurobank, Alpha Bank, and Piraeus is two notches higher than the SACP, reflecting the uplift for extraordinary short-term capital and liquidity support provided by the Greek government and EU authorities. In our view, the upcoming capital support that will be provided by the Hellenic Financial Stability Fund should allow the four banks to absorb the impact of any potential losses which might derive from their participation in the Greek government's debt exchange offer, as well as the impact of high credit provisions on their domestic portfolios while complying with regulatory capital requirements. Still, we think that the magnitude of this support is unlikely to be sufficient to completely offset the impact of the sharply deteriorated economic environment on our view of the banks' solvency. We also take the view that the banks' domestic asset quality is likely to keep deteriorating at a very high pace in the coming quarters, as the domestic economy remains weak and liquidity in Greece is still scarce, thus affecting private borrowers' creditworthiness. Finally, we also believe that the banks have accumulated large imbalances on their funding profile since the beginning of the downturn and that the unwinding of those imbalances is going to be quite difficult in the current environment. We also think that banks remain highly vulnerable to any potential further pressure on retail deposits, as Greek retail funding has proved to be quite volatile over the past few years, despite some stabilization in recent months. In our view, in the medium to long term, the banksare likely to maintain high reliance on European liquidity support mechanisms, including the Emergency Liquidity Assistance (ELA) program set up at the Bank of Greece, to meet their refinancing requirements. Outlook Our negative outlook on NBG, Eurobank, Alpha Bank, and Piraeus is based on the possibility that we might lower the ratings on the banks if we believed they would default on their obligations, as defined by our criteria. We might lower the ratings on the four banks if their access to the EU's extraordinary liquidity support mechanisms, including the ELA discount facility at the European Central Bank, became impaired for any reason. This support currently underpins the banks' capacity to meet their financing requirements. In this context, despite a mild recovery in recent months, we believe the pressure on the banks' retail funding base may lead to further deposit outflows, given the ongoing recession. This could, in our opinion, increase the banks' need for additional extraordinary liquidity support from the EU authorities. We might also lower the ratings on the banks if we believed they were likely to default as a result of any developments associated with a substantial impairment of their solvency. This could happen if, for any reason, the banks were unable to access external capital support, or if we considered such support insufficient to allow the banks to continue meeting regulatory capital requirements, mainly as a result of potential recognition of continued large impairments on loans. A revision of the outlook to stable could be possible if economic conditions in Greece improved and pressure on the banks' financials eased, and once external support materialized. Ratings Score Snapshot National Bank of Greece S.A. Eurobank Ergasias S.A Alpha Bank A.E. Piraeus Bank S.A. Issuer Credit Rating CCC/Negative/C SACP cc Anchor b+ Business Position Adequate (0) Capital and Earnings Very weak (-2) Risk Position Weak (-2) Funding and Average (-5) and Liquidity Very weak Support 0 GRE Support 0 Group Support 0 Sovereign Support 0 Short-Term Extraordinary Support +2 Additional Factors 0 Related Criteria And Research -- Criteria For Assigning 'CCC+', 'CCC', 'CCC-' And 'CC' Ratings, Oct. 1, 2012 -- Banks: Rating Methodology And Assumptions, Nov. 9, 2011 -- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011 -- Group Rating Methodology And Assumptions, Nov. 9, 2011 -- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011 Ratings List Ratings Affirmed National Bank of Greece S.A. Eurobank Ergasias S.A Alpha Bank A.E. Piraeus Bank S.A. Counterparty Credit Rating CCC/Negative/C Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.