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Moody's raises outlook on Greek banking system

Moody's on July 30 changed the outlook on Greece's banking system to positive from stable, reflecting the rating agency's expectation that Greek lenders' asset risk and funding will improve over the next 12 to 18 months amid an improving yet challenging operating environment.

Nondas Nicolaides, a vice president and senior credit officer at the rating agency, said banks' problem loans "will steadily drop from very high levels as they benefit from improved loan recovery laws." Although problem loans will likely remain elevated, Moody's said it expects banks to likely meet targets on reducing nonperforming exposures to approximately 35% of gross loans by the end of 2019.

Moody's noted that banks have comfortable regulatory capital levels and that their dependence on central bank funding and emergency liquidity assistance is declining, adding that most lenders will remain marginally profitable through 2019.