S&P spares BNP Paribas in French banking cull

Three major French banks (Crédit Agricole, Société Générale and BPCE) have been downgraded by Standard & Poors. BNP Paribas is the only major French bank to be exempt from the ratings cull.

The three French banks were downgraded by one notch from A+ to A.

The downgrades are a direct consequence of S&P’s decision to lower the French credit rating by one notch on January 13th from the highest rating possible, AAA, to AA+.

The agency explained the sovereign downgrade means that these banks receive one notch, rather than two notches, of sovereign support on its stand-alone credit profile.

“We note that, under our criteria, if all other factors remain the same, were we to lower the ratings on France by one notch, this would not trigger a downgrade of Société Générale,” S&P added.

By contrast, BNP Paribas’ long-term rating was unaltered at AA-. S&P said the bank continued to demonstrate a “very strong” business position, “moderate” capital and earnings, “strong” risk position, “average” funding, and “adequate” liquidity.

It added it viewed BNP Paribas as having “high” systemic importance in France and that the French government is “supportive” to its banking sector.

S&P had already warned downgrades to all of these banks including BNP Paribas were likely if France lost its AAA.

The financial community remains unsurprised by the agency’s recent actions.

Antoine Laurent (pictured), analyst at French fund selector Insti7, said France losing its AAA rating would not bring real harm to the French or European financial sector, despite increasing the likelihood that some French banks would also be downgraded.

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