BNP Paribas SA, Societe Generale SA and Credit Agricole SA, France’s largest banks by market value, could have their credit ratings cut by Moody’s Investors Service as soon as this week because of their Greek holdings, two people with knowledge of the matter said.
Moody’s placed the three banks’ ratings on review in June to examine “the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels,” the rating company said at the time.
Cuts are likely as the review period concludes, said the people, who declined to be identified because the matter is confidential.
G7 finance chiefs vowed on Friday to support banks and buoy slowing economic growth as Europe’s debt crisis roiled financial markets and threatened a global recession.
Renewed fears that European policy makers are not doing enough to prevent a Greek default and contain their debt woes prompted investors to sell stocks and push the euro to a six-month low against the US dollar. European bank and sovereign credit risk reached all-time highs as 10-year Treasury and German bund yields fell to record lows on demand for a haven.
“We will take all necessary actions to ensure the resilience of banking systems and financial markets,” G7 finance ministers and central bankers said in a statement released during weekend talks in Marseille, France. “Concerns over the pace and future of the recovery underscore the need for a concerted effort at a global level in support of strong, sustainable and balanced growth.”
Moody’s currently rates BNP Paribas’ long-term debt at “Aa2,” the third-highest investment grade. Credit Agricole is rated “Aa1,” the second highest, while Societe Generale is “Aa2.”
Credit Agricole spokeswoman Anne-Sophie Gentil declined to comment, as did BNP Paribas spokesman Antoine Sire. Societe Generale spokeswoman Laetitia Maurel said she could not immediately comment. Voicemail messages left on the mobile and office lines of Moody’s chief European spokesman Daniel Piels on Saturday, outside of working hours, were not immediately answered.
The reviews of Credit Agricole and BNP Paribas are unlikely to lead to downgrades of more than one level, Moody’s said when it put the banks under review. Societe Generale’s debt and deposit ratings may be cut as much as two grades because of the “uplift it receives from systemic support, which is currently higher than average for the French banking system,” the rating company said at the time.
Meanwhile, reflecting mounting concern Greece could default and that the debt crisis is morphing into a banking crisis, German Chancellor Angela Merkel’s government is preparing plans to shore up its nation’s financial sector. The measures involve aiding lenders and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece’s bailout is withheld, said three coalition officials, who spoke on condition of anonymity because the deliberations are private.
The existence of a “Plan B” comes as German lawmakers intensify their criticism of Greece, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country’s progress.
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