French banks in firing line over Greek debt crisis
PARIS (AP) — Contagion from the Greek financial crisis was felt in France on Wednesday, when credit ratings agency Moody's said it may downgrade its ratings of the country's three largest banks over their exposure to debt-ridden Greece.
BNP Paribas SA and Credit Agricole SA face one-notch downgrades and Societe Generale SA could see a two-notch decline through their holdings of Greek government bonds or through their local banking subsidiaries, Moody's said.
The move followed Moody's decision earlier this month to cut Greece's own rating by three notches from a B1 rating to Caa1 with a negative outlook, citing increased risk that the financially stricken country will be unable to handle its debt problems without an eventual restructuring — paying creditors less than the full amount, or later than originally planned.
Societe Generale CEO Frederic Oudea has said a possible Greek debt restructuring "would be unpleasant but manageable" for the bank. A spokeswoman for the bank declined to comment further Wednesday. Spokespeople for BNP Paribas and Credit Agricole didn't immediately return calls for comment.
A government spokesman sought to downplay the importance of the looming downgrade.
"We're not worried," said Francois Baroin after the weekly cabinet meeting. "You know, French banks are among the most highly rated large international banks today, the strongest, they've stood up to all the international tests."
Shareholders took a more cautious view, selling off the banks' shares to the tune of 1.6 percent for BNP Paribas, 1.4 percent for Credit Agricole, and 2 percent for Societe Generale.
Credit Agricole has only a "modest" exposure to Greek government debt, Moody's said, but it owns Athens-based bank Emporiki, which Moody's had already downgraded earlier this month.
Societe Generale also owns a small Greek bank, Geniki, but the main risk comes from its holdings of Greek government debt, reported to be euro2.5 billion at the end of the first quarter, Moody's said.
BNP Paribas's holdings of Greek government debt are twice that, euro5 billion, but unlike the others it has no local subsidiary.
The impact could spread beyond France, Moody's warned. "Moody's may take similar actions on other banks with direct exposures to Greece in the coming weeks," it said. It is also "closely monitoring" the risks of a Greek default scenario, including the impact on weaker countries, capital markets, and funding conditions. "Banks across the euro zone" are potentially vulnerable, Moody's said.
Greg Keller can be reached at http://twitter.com/Greg_Keller