February 28, 2024

Asian Markets Dip Further After Moody’s Downgrades French Banks

Mounting worries about the exposure of the three leading French banks — Société Générale, Crédit Agricole and BNP Paribas — to Greece and their ability to handle a potential default by Greece on its debt had sent the stocks of all three financial institutions sharply lower in recent days.

On Wednesday, Moody’s downgraded its ratings for Société Générale and Crédit Agricole, citing their exposure to the Greek economy and the fragile state of bank financing markets. It kept BNP Paribas under review for a possible downgrade.

The downgrades had been widely anticipated by investors but nevertheless sparked knee-jerk drops in the euro and Asian stock markets, both of which had already been on the back foot earlier in the Asian trading day.

The euro, which had been hovering at around the mid-$1.36 level before news of the downgrades, slipped to $1.36 soon afterward.

In Japan, the Nikkei 225 index closed down 1.1 percent, the benchmark index in Australia ended 1.6 percent lower, and in Taiwan, the Taiex lost 2.2 percent.

In South Korea, where the market had been closed on Monday and Tuesday for a holiday, the Kospi dropped 3.5 percent.

The Hang Seng in Hong Kong and the Straits Times in Singapore were 1.5 percent and 0.5 percent lower, respectively, by midafternoon.

Société Générale, BNP Paribas and Crédit Agricole are considered integral actors in the French economy, lending billions of euros to businesses and individuals, and the government has said it will never let them any of them fail.

Officials have said that the French banks are adequately capitalized and currently do not need the government to provide them with additional funds.

Moreover, Société Générale announced Monday that it would raise new cash by selling assets, and BNP Paribas, the largest French bank by assets, followed suit with a similar announcement on Wednesday.

In a presentation
on its Web site, BNP said it planned to cut its risk-weighted assets by about €70 billion, or $95.7 billion, and improve its Tier 1 capital ratio — a common measure of banks’ strength — to 9 percent by the start of 2013.

Article source: http://www.nytimes.com/2011/09/15/business/daily-stock-market-activity.html?partner=rss&emc=rss

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