Moody’s Downgrades French Banks

With many European banks finding it difficult to get funding in the past several months, a number of them have gone for help to the European Central Bank (ECB) and their own national central banks. Moody’s said that Société Générale, BNP Paribas and Crédit Agricole had “materially” added to their borrowing from the French central bank in September, and added that it was “unlikely that markets will return to normalcy soon.”

Despite the fact that Société Générale and BNP Paribas substantially cut their holdings of Italian debt and also recently took losses on their investments in Greek bonds, Moody’s pointed out that both Société Générale and Crédit Agricole are still exposed to Greece through subsidiaries in that country that could cause additional problems if Greece defaults or departs the euro. Further, BNP Paribas has Italian exposure through a retail banking outlet.

As a means of raising capital to safeguard against new losses, each of the banks has said it will sell off assets. Moody’s, however, pointed out that investors are hardly eager in the current market and warned that the banks might find it difficult to locate buyers. Société Générale said it was “confident” it could meet its capital goals, adding that it was “surprised” by Moody’s action.