French banks take another ratings hit

Moody’s downgraded by one notch three major banks of France - BNP Paribas, Credit Agricole and Société Générale - this morning.

The move brings the long-term debt and deposit rating down to A1 from Aa3 for Société Générale and to Aa3 from Aa2 for BNP Paribas and Credit Agricole.

Liquidity and funding constraints were given as the cause for the downgrade as the euro crisis increases in severity.

The downgrades come out of a review which began in June 2011 and was extended in September. This found that as banks throughout Europe are simultaneously trying to gain capital, returns from asset sales risk being lower than expected, and although all three of the downgraded banks have cut exposure to peripheral sovereigns, there is still a significant amount of risk on their books.