And it shall be, as with the people, so with the priest; as with the servant, so with his master; as with the maid, so with her mistress; as with the buyer, so with the seller; as with the lender, so with the borrower; as with the taker of usury, so with the giver of usury to him…
French bank ratings downgraded by Moody’s
Credit rating agency Moody’s has downgraded two French banks after reviewing their exposure to Greek debt.
Credit Agricole was cut from Aa1 to Aa2 and Societe Generale from Aa2 to Aa3.
A third bank, BNP Paribas, was kept on review for a possible downgrade.
German Chancellor Angela Merkel and French President Nicolas Sarkozy are due to hold talks on Wednesday with Greek Prime Minister George Papandreou, in response to growing market fears of an imminent debt default by Greece.
Meanwhile, the European Commission president, Jose Manuel Barroso, said he would put forward a proposal for the 17 eurozone governments to jointly guarantee their debts, via so-called eurobonds.
Moody’s said it was also planning to extend its review of all three banks “to consider the implications of the persistent fragility in the bank financing markets, given the banks’ continued reliance on wholesale funding”.
This further review could result in an additional one-notch downgrade, the agency warned.
The markets for short-term cash lending between European banks have become increasingly stressed in recent days, while share prices in European banks have fallen sharply.
Credit Agricole and Societe Generale have seen their share prices fall by about two-thirds since February, while BNP has fallen by more than half.
By early Monday afternoon trading, shares in Societe Generale had dropped a further 4.4% and BNP 2.7%, while Credit Agricole had rallied 0.5%.
Both BNP Paribas and Societe Generale have issued statements in recent days to clarify the extent of their exposure to Greece and other troubled eurozone economies.
Moody’s backed the two banks, saying they both had enough capital to provide “an adequate cushion to support its Greek, Portuguese and Irish exposures”.
Nonetheless, it decided to downgrade Societe Generale, as it felt the bank no longer benefited from a higher level of French government support than its two rivals.
All three banks’ ratings have been on review since 15 June, and Moody’s decision had been widely anticipated by the markets.
French central bank head Christian Noyer welcomed the downgrade decision as “relatively good news”.
“French banks have an excellent rating, the same level as other major European banks – HSBC, Barclays, Deutsche Bank, Credit Suisse,” he said.
“It’s a very small downgrade, and Moody’s had a higher rating than the other agencies so it’s just put them on the same level or slightly better than the others.”
However, the downgrade is likely to put further pressure on the banks, as many investors limit how much they are willing to lend to them or invest in their shares based on their credit ratings.
Credit Agricole said that it had decided to extend a guarantee to its investment banking subsidiary in response to the rating review.
Meanwhile, BNP Paribas joined Societe Generale in announcing large asset sales in order to reduce its total exposures.
The bank said on Wednesday that it would sell 70bn euros of assets, or 10% of the bank’s entire balance sheet, with a focus on its dollar-denominated loans.
On Tuesday, BNP denied a report in the Wall Street Journal claiming the bank was no longer able to borrow in dollars.
SocGen has a total exposure to Greek government and commercial debts equal to 6.6bn euros, while Credit Agricole has 27bn euros, according to their disclosures to the European Banking Authority.
For BNP Paribas the total is 8.5bn euros.
He who increases his wealth by interest and usury gathers it for him who is gracious to the poor…