Irish banks vulnerable to Grexit - Moody’s

Peripheral European countries, including Ireland, are vulnerable in the event that Greece fails to reach a deal with its European partners and exits the Eurozone, a report from ratings agency Moody’s said on Monday.

While Moody’s asserts that overall euro area banks are better prepared to weather such a scenario than at the height of the euro area crisis, it notes that banks in other periphery countries — Cyprus, Ireland, Italy, Portugal and Spain — remain vulnerable in the event of an exit.

"Banks in the periphery markets have strengthened their financial positions in recent years," said Sean Marion, a managing director in Moody's London-based banking team. "But, legacy issues from the previous crisis still weigh on their ability to return to full financial health, while they are also more susceptible to restricted market access and higher cost of wholesale funding in the event of an adverse shock, given their more limited balance sheet flexibility."

In the report, "European banks better prepared for Grexit; periphery banks remain vulnerable", Moody's said that overall banks are now in a better position.

“Broad improvement in euro area banks’ financial conditions and an associated stabilisation in the region’s economic environment has made banks more resilient to external shocks than was the case during the height of the euro area crisis,” Mr Marion said.

Moody’s says that risk of restricted market liquidity, or “contagion”, is also lower than three years ago as investor confidence has been bolstered by a gradual return to economic growth across the region and the increased number of tools euro area policymakers can deploy as an important backstop in the event banks’ access to market funding were disrupted.