Moody's Close To Downgrading French Banks On Greek Debt Exposure

Moody's has its ratings of France's top 3 banks, BNP Paribas, Societe Generale and Credit Agricole, on review for a potential downgrade, as the exposure to Greek debt is too much to handle.

Moody's said that the debt exposure these three banks have would be worth of a one notch downgrade, except for Societe Generale, which would be downgraded two grades.

In the note, Moody's wrote, "Moody's Investors Service has today placed the standalone financial strength ratings and long-term debt and deposit ratings of three French banking groups -- Credit Agricole SA (CASA), BNP Paribas SA (BNPP), and Societe Generale SA (SocGen) on review for possible downgrade.

"The primary focus of all three reviews will be the banks' credit exposures to Greek government debt and the Greek private sector and the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels. The review of SocGen will also assess the likelihood of future government support since our systemic support assumption is currently higher than the average for the French banking system."

Moody's also discussed the potential for a downgrade to Dexia Group, which also has Greek debt exposure of EUR3.5 billion as of March 31, 2011.

In addition to the three top French Banks, Moody's also discussed a potential downgrade to Banque Federative du Credit Mutuel, Credit Industriel et Commercial, Credit Mutuel Arkea and BPCE on their Greek debt exposure as well. Moody's said in the note it will consider a potential downgrade, despite the fact these banks have lower exposures to Greek debt.