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Two biggest French banks downgraded by Moody's

09-15-2011 09:14 BJT

PARIS, Sept. 14 (Xinhua) -- Financial ratings agency Moody's downgraded on Wednesday the rating of two leading French banks, Societe Generale and Credit Agricole SA, while pinned the biggest BNP Paribas (BNPP) on review.

The U.S.-based agency has cut Credit Agricole's rating from Aa1 to Aa2 and Societe Generale from Aa2 to Aa3, citing Greek exposure for the former and funding and liquidity problems for the latter.

France's second-largest listed bank Societe Generale's "capital base currently provides an adequate cushion to support its Greek, Portuguese and Irish exposures," but its dependency on wholesale funding is a problem, Moody's concluded in a statement.

Meanwhile, Credit Agricole's ratings remain on review for possible downgrade, Moody's said, given "the potentially persistent fragility in the bank financing markets" could affect the group.

BNP Paribas has maintained the Aa2 long-term debt and deposit ratings by Moody's since June 15, 2011, which the rating agency said to extend for "a sufficient level of profitability and capital that it (BNPP) can absorb potential losses it is likely to incur over time on its Greek government bonds."

French banks have been put on edge since last month when rumors spread that France's sovereign debt rating was to be downgraded from AAA level due to heavy exposure to Greeke debt woes and its own high deficit.

French Economy Minister Francois Baroin and Central Bank Governor Christian Noyer have urged banks to disclose usually more detail of their financial situation to guard the market confidence. Shortly after the G7 financial ministers' gathering in southern France, Societe Generale has done that as requested, following BNPP.

"It's relatively good news, the downgrade is very limited," and the notes are "better" than expected, Noyer commented at Moody's downgrading on Wednesday.

"The level of capital and the profitability of French banks allow them to absorb all the potential losses on sovereign risks" in the context of the abnormal turmoil impacting the banking system, the central bank governor asserted.

Though excluding liquidity and solvency problems of French banks, Noyer meanwhile underlined the importance for the banks to keep on strengthening their capital equity to comply with Basel III rules.

 

Editor:Zhang Rui |Source: Xinhua

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