Fitch warns on French bank ratings

29th September 2011, Comments 0 comments

Ratings agency Fitch warned on Thursday that France's banks could see their credit worthiness downgraded because of fears over their exposure to eurozone members' risky sovereign debt.

The entire eurozone is under pressure over the debt crisis in its weaker members, but French lenders are seen as particularly overexposed to massive debts in Greece, Spain and Italy.

Shares in French giants like BNP Paribas, Societe Generale and Credit Agricole have see-sawed wildly in recent weeks, as traders have alternated between fear of default and hope for an EU rescue package.

"Concerns about French banks are mostly centred on their exposure to southern European countries," Fitch said in a statement.

"French banks have the most cross-border sovereign and non-sovereign exposure to Greece, Italy, Ireland, Portugal and Spain," it said.

"While exposure to Greece, Ireland and Portugal is modest, inclusion of Spain and, in particular Italy, significantly increases the totals."

European policymakers are desperately trying to contain the Greek debt crisis, through an expanded bailout fund, in order to prevent the threat of default spreading to the much larger Spanish and Italian economies.

Fitch noted that the French government has been publicly resisting pressure to spend taxpayers' cash in recapitalising at-risk banks, and warned that this may prove necessary.

"The collective impact of negative market drivers and corresponding fundamental factors reinforces enhanced downside pressure on ratings of the large French banks, along with many of their European peers," it said.

The agency warned French banks are falling behind their European competitors in improving their capital to debt ratios, and expressed concern that they were finding it hard to access short-term US dollar liquidity.

© 2011 AFP

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