Moody’s May Downgrade French Banks

Reuters says  major French banks might be downgraded by Moody’s, a move that would further increase the tension in the financing markets.

Citing people familiar with the matter, Reuters says BNP Paribas, Societe Generale and Crédit Agricole will soon be faced with the decision by Moody’s to downgrade their credit ratings.

On June 15th, Moody’s put these three banks on the downgrade observation list, as these French banks were largely exposed to the risk of Greek sovereign debt. As the financing costs are being increasingly expensive because of the European debt crisis, it seems to be the right time to downgrade the credit ratings of these banks.

According to Bank of International Settlements, French banks are exposed to the highest risks of Greek debt. As part of the Greek new aid program, French banks have started to write down the Greek sovereign debt they hold, but some people think the write downs were not enough.

Moody’s and the three French banks all refused to make comments on the issue to Reuters.