* Banks expecting Moody's decision "imminently" -sources
* Agency first put lenders under review in mid-June
* Funding fears have led to depressed share valuations
By Lionel Laurent
PARIS, Sept 10 France's top banks are bracing
themselves for a likely credit rating downgrade from Moody's,
sources close to the situation said on Saturday, further
complicating their efforts to assure investors they are riding
out the tensions in funding markets.
Several sources said on Saturday that BNP Paribas ,
Societe Generale and Credit Agricole were
expecting an "imminent" decision from the ratings agency, which
first put them under review for possible downgrade on June 15.
Moody's at the time had cited French banks' exposure to
Greece's debt-stricken economy as the reason behind the review,
which was due to last three months. Outside commentators said
the ratings were ripe for a downgrade because of rising
borrowing costs in the face of sovereign debt turmoil.
"The decision is imminent," one Paris-based source said. "It
will probably be a downgrade but it's not certain yet."
France's lenders -- two of which own local banks in Greece
-- have the highest overall bank exposure to Greece, according
to the Bank for International Settlements. They have begun to
take writedowns on their Greek sovereign debt holdings as part
of a new rescue package but some say not aggressively enough.
Greece vowed on Saturday to stay the course of austerity and
avoid bankruptcy as anger at the country's failure to meet
fiscal targets under its EU/IMF bailout reached boiling point.
The three French banks and Moody's declined to comment for
this story. The agency said in June it was considering cutting
BNP and Credit Agricole by one notch and SocGen by up to two
notches because of the level of state aid it received in the
Moody's long-term senior debt ratings for BNP, SocGen and
Credit Agricole are respectively Aa2, Aa2 and Aa1, all assigning
high grade creditworthiness.
A downgrade, though well-flagged, would be another reminder
of deteriorating market sentiment as investors discount economic
slowdown in Europe, tougher capital requirements on banks and
the unfolding drama in Greece and the euro area.
Sovereign debt turmoil has crushed European banks' share
prices since the start of the summer and pushed up their cost of
borrowing, especially from U.S. dollar money markets.
French banks, seen as particularly reliant on short-term
funding, have been among the hardest hit. SocGen shares are down
57 percent since the end of June and are flirting with levels
not seen since March 2009, when Europe was in recession.
SocGen, Credit Agricole and larger arch-rival BNP -- which
together held around 6 billion euros ($8 billion) of Greek
sovereign debt at end-March -- recently sought to reassure
investors on their funding positions by giving extra disclosures
on liquidity, but that has failed to stem the sell-off.
Some say the only way out is for Europe to recapitalise its
battered banking sector to better absorb sovereign debt losses
and to cope with tougher capital requirements. IMF chief
Christine Lagarde has been a vocal proponent of such a measure.
($1 = 0.729 Euros)
(Additional reporting by Matthieu Protard; Editing by Ruth