Moody's on Friday downgraded the long-term deposit and senior debt ratings of eight rated Greek banks by two notches, with all of the banks' long-term deposit and debt ratings carrying a negative outlook.

Moody's downgraded National Bank of Greece (NBG), EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece (ATE) and Attica Bank from B3 to Caa2, and Emporiki Bank and General Bank of Greece (Geniki) to B3 from B1.

The rationale for the downgrading included a substantial deterioration of the domestic economy and the above credit institutions' exposure to Greek government bonds.

Moody's also said that although the recently announced merger of Alpha Bank and EFG Eurobank Ergasias has some potential positive elements for the credit standing of the future joint entity (that will result from the merger, which is expected to be completed by the end of 2011), Moody's believes that these are offset by the currently fragile operating environment.