Moody’s Investors Service cut the ratings of two French banks on Wednesday, citing their holdings of Greek sovereign debt as the reason. Crédit Agricole and Société Générale were both downgraded a single notch, the former to Aa1 and the latter to Aa3, while BNP Paribas was left at Aa2 but was kept under review.
The New York Times reported that the ratings agency took the action because of the banks’ exposure to Greek debt and the condition of markets for bank financing. European markets and the euro opened lower on the news, but recovered somewhat in early trading.
Meanwhile, Asian markets did not fare so well; the Nikkei closed down 1.1%, the Australian index lost 1.6%, and Taiwan’s Taiex finished the day 2.2% lower. South Korea’s Kospi lost 3.5%, and the Hang Seng in Hong Kong was up 0.08%.
Société Générale had announced Monday that it would sell off assets to raise cash, and Tuesday its CEO, Frederic Odea, appeared on Bloomberg Television to discuss the bank’s outlook. Saying he was “sure we will be able to regain confidence,” Odea added, “the exposure to sovereign debt is low, absolutely manageable. People need to look at the figures. Secondly, in terms of liquidity, we have plenty of liquidity and we are adjusting through the reduction of the money market fund exposure. So based on a sound balance sheet, good business sense, we will say to people, look at the figures, forget about perception and irrational fears.”