European Debt Crisis Expands: French Banks on Review for Downgrade by Moody's

The European debt crisis deepened on Wednesday, as Moody's Investors Service announced that it had put three of France's top banks on review for downgrade, citing exposure to Greek debt. BNP Paribas, Societe Generale and Credit Agricole were all placed on review. Greece has been conducting ongoing negotiations with leaders of the European Union and International Monetary Fund over a possible second bailout. In a statement, the ratings agency notes: "Today's actions reflect Moody's concerns about these banks' exposures to the Greek economy, either through direct holdings of government bonds or credit extended to the Greek private sector directly or through subsidiaries operating in Greece, a key factor for CASA and SocGen due to their local Greek banks." Further unsettling market watchers is an accompanying caveat in its announcement: "Moody's may take similar actions on other banks with direct exposures to Greece in the coming weeks, if it considers that their ratings may be inconsistent with the potential impact of a Greek default or restructuring," Moody's commented. European leaders have hoped to sort out Greece's debt issues by the end of the month. According to a Reuters report, "The ratings review helped weigh on the euro, already under pressure after an Financial Times report saying a German-inspired Greek debt rescheduling plan could force euro-zone governments to provide up to an extra 20 billion euros ($29.2 billion)." The matter will be watched closely, the ratings agency commented. The Moody's note adds: "Additionally, we are closely monitoring the risks that would likely result from a Greek default scenario, e.g. the potential impact on weaker countries, the capital markets, and funding conditions, and are taking those risks into consideration in our ratings of banks across the euro zone."