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PARIS Jan 12 Credit ratings agency Fitch
does not expect France's government to have to provide capital
to bolster its banking system, its head of sovereign ratings
said on Thursday.
Fitch put France's AAA credit rating on negative outlook
last month and said that it was the triple A country the most
exposed to a deterioration of the euro zone's debt crisis.
French banks' holdings of debt from troubled states and
reliance on wholesale funding left them exposed as the crisis
worsened last year, making them increasingly dependent on
liquidity from the European Central Bank (ECB).
While the banks' troubles had put some pressure on the
French state, Fitch's managing director for sovereign ratings,
David Riley, said that it would probably not have to
recapitalise them although the risk was not totally
"It's not our expectation that the French government will
need to provide...capital support to French banks," Riley told a
conference in Paris.
The ratings agency told Reuters on Tuesday that it did not
expect to downgrade France this year given the country's current
economic and fiscal fundamentals unless the euro zone crisis
Riley said that euro zone could not count on help from
countries like China to solve its problems and that ultimately
containing the debt crisis would require greater use of the
ECB's balance-sheet, especially to keep Italy being dragged
deeper into the crisis.
"Italy needs a credible financial firewall, we need to close
off this risk of a self-creating liquidity crisis. And that, in
the end, will have to be at the European level," Riley said.
Fitch currently has Italy's A+ on a negative watch and Riley
said that the ratings agency aimed to wrap up a review of the
country by the end of the month.
(Reporting by Leigh Thomas; writing by Daniel Flynn; Editing by
Alexandria Sage and Toby Chopra)