Ratings agency Moody's today warned it may downgrade the rating of major French banks Credit Agricole, BNP Paribas and Société Générale because of their exposure to Greek debt.
The announcement came as European leaders failed to agree on the terms of a possible second bail-out for Greece to avert a possible default after talks in Brussels last night.
Moody's said it had 'placed the standalone financial strength ratings and long-term debt and deposit ratings of three French banking groups on review for possible downgrade.'
It said it would review the banks' exposure 'to Greek government debt and the Greek private sector and the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels.'
'Today's actions reflect Moody's concerns about these banks' exposures to the Greek economy, either through direct holdings of government bonds or credit extended to the Greek private sector directly or through subsidiaries operating in Greece,' it added.
France's minister for Europe, Laurent Wauquiez, moved to calm concerns raised by the announcement. 'The French banking sector is less exposed than the German banking sector. We need to stay calm and serene on all these issues,' he said.
Moody's had already downgraded the deposit and senior debt ratings of eight Greek banks on June 3, having downgraded Greece's sovereign ratings just days earlier. It said Credit Agricole and Société Générale both had banking subsidiaries in Greece which had already been downgraded.
BNP does not have a banking subsidiary in Greece and its exposure to the country was 'more modest', Moody's said, although BNP held Greek government debt of around €5 billion by the end of last year. BNP said last month it would likely be able to absorb the shock of a restructuring of Greece's debt.
Moody's said that Franco-Belgian bank Dexia could also face a downgrade due to its exposure to the Greek market.
IMF ups French forecast - Lagarde
The International Monetary Fund has sharply raised its growth forecast for France for this year and next to 2%, from 1.6% and 1.8% respectively, the French economy minister said today.
Minister Christine Lagarde unveiled an embargoed IMF report in which the global lender brought its forecast into line with France's own target. But the report warned the French government to be 'realistic' in its budget plans despite the stronger forecast.