Ratings agency Moody’s warned yesterday it may downgrade the rating of major French banks Credit Agricole, BNP Paribas and Societe Generale because of their exposure to Greek debt.
The announcement came as European leaders failed to agree on the terms of a possible second bailout for Greece to avert a possible default after talks in Brussels late on Tuesday.
Moody’s said it had “placed the standalone financial strength ratings and long-term debt and deposit ratings of three French banking groups ... on review for possible downgrade.”
It said it would review the banks’ exposure “to Greek government debt and the Greek private sector and the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels.”
“Today’s actions reflect Moody’s concerns about these banks’ exposures to the Greek economy, either through direct holdings of government bonds or credit extended to the Greek private sector directly or through subsidiaries operating in Greece,” it said.
The statement said Credit Agricole’s “Aa1” long-term rating and BNP’s “Aa2” rating faced a downgrade of one notch while Societe Generale’s “Aa2” rating could fall by two notches.
France’s minister for Europe, Laurent Wauquiez, moved to calm concerns raised by the announcement.
“People shouldn’t stir things up,” he said on France Info radio. “The French banking sector is less exposed than the German banking sector, for example.”
“We need to stay calm and serene on all these issues,” he added. “We have to keep our hand on the rudder ... Our course is to defend our common currency together.”
Moody’s had already downgraded the deposit and senior debt ratings of eight Greek banks on June 3, having downgraded Greece’s sovereign ratings just days earlier.
It said Credit Agricole and Societe Generale both had banking subsidiaries in Greece that had already been downgraded.
BNP does not have a banking subsidiary in Greece and its exposure to the country was “more modest,” Moody’s said, although BNP held Greek government debt of about 5 billion euros (US$7 billion) as of Dec. 31 last year.
BNP said last month it would likely be able to absorb the shock of a restructuring of Greece’s debt.
Moody’s said that Franco-Belgian bank Dexia could also face a downgrade due to its exposure to the Greek market.
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