French banks set for Moody’s downgrade

FRANCE’S top banks are bracing themselves for a likely credit rating downgrade from Moody’s as early as this week, sources close to the situation said, further complicating their efforts to assure investors they are riding out the tensions in funding markets.

Several sources said this weekend that BNP Paribas, Societe Generale and Credit Agricole were expecting an “imminent” decision from the ratings agency, which first put them under review for possible downgrade on 15 June.

Moody’s at the time had cited French banks’ exposure to Greece’s debt-stricken economy as the reason behind the review, which was due to last three months. Outside commentators said the ratings were ripe for a downgrade because of rising borrowing costs in the face of sovereign debt turmoil.

“The decision is imminent,” a Paris-based source said. “It will probably be a downgrade but it’s not certain yet.”

France’s lenders -- two of which own local banks in Greece -- have the highest overall bank exposure to Greece, according to the Bank for International Settlements. They have begun to take writedowns on their Greek sovereign debt holdings as part of a new rescue package but some say not aggressively enough.