French Bank Downgraded By Moody Ratings

The rating agency Moody's has been reduced to two French banks because of their exposure to debt greek.

Crédit Agricole has been cut off from Aa1 to Aa2, and Aa2 by Societe Generale to Aa3.

A third bank, BNP Paribas, has been continued for consideration downgrade.

German Chancellor Angela Merkel and French President Nicolas Sarkozy is due to meet Wednesday with Greek Prime Minister George Panandreou, in response to growing market fears of a looming debt default by Greece.

Markets stressed

Moody said he also plans to expand the examination of the three banks "to examine the consequences of the continuing fragility of bank funding markets, given the dependence of banks on wholesale funding continues."

The reassessment could result in an additional reduction in one step, the agency said.

Markets in the short term cash loans between European banks have been increasingly highlighted in recent days, while the share prices of European banks fell sharply.

Crédit Agricole and Societe Generale saw their share prices fall by about two-thirds since February, while GDP fell by more than half.

In the first hour of trading on Monday, fell 3.1% BNP and Societe Generale 1.7%, while Credit Agricole rose 2.5%.

Both BNP Paribas and Société Générale rushed to the statements of recent days to clarify the extent of their exposure to Greece and other eurozone economies in difficulties.

Moody exception of two banks, saying they both had enough capital to provide "a sufficient cushion to support its programs Greek, Portuguese and Irish."

However, Societe Generale has decided to downgrade, because it seemed that the bank no longer received support from the French government for more than its two competitors.

"Little downgrade '

All notes of the three banks were in the review from the June 15 and the decision was widely anticipated by Moody markets.

Moody said that all three banks were strong enough to take any losses from debt default greek.

French central bank Christian Noyer head welcomed the decision to cut as "relatively good news."

"The French banks have an excellent rating at the same level as other major European banks - HSBC, Barclays, Deutsche Bank, Credit Suisse," he said.

"This is a very small downgrade, and Moody had a rating higher than other agencies, it's just us putting them on the same level or slightly better than the other."

But the downgrade is likely to put further pressure on banks, as many investors limit to how much they are willing to lend or invest in their shares on the basis of creditworthiness.

Crédit Agricole said it had decided to extend the warranty to its investment banking subsidiary in response to the note.

At the same time joined the BNP Paribas, Societe Generale announces important asset sale to reduce its liabilities.

The bank said on Wednesday it sold 70 million euros in assets, 10% of the bank's balance sheet as a whole, with a focus on loans denominated in dollars.

On Tuesday, the BNP has denied a report in the Wall Street Journal saying the bank was no longer able to borrow in dollars.

Moody's review focused on banks' exposure to the Greek economy, although the recent market selloff reflects a broader concern about the health of other European countries such as southern Italy and the political will to support euro.

SocGen has a total exposure to the Greek government and commercial debt, equivalent to 6.6 billion euros, while Credit Agricole has 27 billion euros, according to their information to the EBA

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