French bank ratings downgraded by Moody`s
Baku, September 14 (AZERTAC). Credit rating agency Moody`s has downgraded two French banks because of their exposure to Greek debt.
Credit Agricole was cut from Aa1 to Aa2 and Societe Generale from Aa2 to Aa3.
A third bank, BNP Paribas, was kept on review for a possible downgrade.
German Chancellor Angela Merkel and French President Nicolas Sarkozy are due to hold talks on Wednesday with Greek Prime Minister George Panandreou, in response to growing market fears of an imminent debt default by Greece.
Moody`s said it was also planning to extend its review of all three banks "to consider the implications of the persistent fragility in the bank financing markets, given the banks` continued reliance on wholesale funding".
This further review could result in an additional one-notch downgrade, the agency warned.
The markets for short-term cash lending between European banks have become increasingly stressed in recent days, while share prices in European banks have fallen sharply.
Credit Agricole and Societe Generale have seen their share prices fall by about two-thirds since February, while BNP has fallen by more than half.
In the first hour of trading on Monday, BNP dropped a further 3.1% and Societe Generale 1.7%, while Credit Agricole rose 2.5%.
Both BNP Paribas and Societe Generale have rushed out statements in recent days to clarify the extent of their exposure to Greece and other troubled eurozone economies.
Moody`s backed up the two banks, saying they both had enough capital to provide "an adequate cushion to support its Greek, Portuguese and Irish exposures".
Nonetheless, it decided to downgrade Societe Generale, as it felt the bank no longer benefited from a higher level of French government support than its two rivals.
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