NEW YORK—Credit rating agency Moody’s Investors Service has downgraded the credit quality of three of the largest French banks, citing liquidity concerns.
The long-term debt of banking giants BNP Paribas and Credit Agricole were downgraded by one notch to Aa3, while Societe Generale was cut one notch to A1. “Liquidity and funding conditions have deteriorated significantly,” Moody’s said in a research statement.
Stating that it is “unlikely that markets will return to normalcy soon,” Moody’s cited that the banks have borrowed heavily from the French Central Bank in recent times and that the French government will bail out the banks if they are deemed too weak.
The announcement also puts France’s AAA-rating at risk. Standard & Poor’s last week warned that it might downgrade the credit rating of 15 of the 17 eurozone nations. If that is realized, the debt holdings held at the banks will further deteriorate.
In a statement, Societe Generale expressed that it was “surprised” at Moody’s decision and maintained that the bank can meet regulatory capital requirements on its own.
Shares of French banks have suffered this year, as they hold the most issued debt—collectively—of troubled European nations compared to any other nation’s banks, according to the Bank of International Settlements (BIS).
The shares of Credit Agricole have declined by 49 percent since Jan. 1 to 4.80 euros per share. BNP has declined by more than 31 percent, and Societe Generale by more than 55 percent.
