Moody's Investors Service lowered its ratings on two Cypriot banks, citing their increased exposure to Greece and their vulnerability to a possible Greek exit from euro zone.

Bank of Cyprus (BOC), the largest lender on the Mediterranean island, had its deposit and senior unsecured debt ratings cut by one notch to B2 from B1 and the stand-alone credit assessment lowered to B3 from B2.

Moody's also cut Hellenic Bank Ltd's deposit ratings by one notch to B1 from Ba3 and the stand-alone credit assessment lowered to B2 from B1.

Both banks were also put on review for a possible further downgrade.

Cyprus Popular Bank, the country's second-largest lender, was also put on review for a downgrade.

"Although a Greek exit is not Moody's central scenario, the rating agency says that it considers the risk of a euro exit by Greece as substantial and recognizes that the probability of such an outcome may increase further following the Greek parliamentary elections on 17 June," Moody's said in a statement.

The rated Cypriot banks maintain extensive branch operations in Greece, with exposures to Greek borrowers amounting to 42 percent of net loans for CPB, to 34 percent of gross loans for BoC, and 17 percent of gross loans for Hellenic. As such, their capital positions remain susceptible to the direct and indirect consequences of a Greek exit," Moody's said.

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