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By Linda Young
Moody's announced it was downgrading the credit rating of all three of France's top banks because of the difficulty they have borrowing money.
Credit Agricole and BNP Paribas went down one notch from a Aa2 rating to Aa3, which is the fourth-highest investment grade rating. Societe Generale fell from Aa3 to A1, the fifth-highest rating. The best rating a bank can get is AAA.
BNP is the largest bank, Societe Generale is second and Credit Agricole is third.
The credit rating agency also gave each of the three a negative outlook and warned that it might downgrade them again.
Moody's said that not only had liquidity and funding conditions deteriorated at each of the banks, but that it was likely the situation would become worse because of further funding pressures from the European debt crisis, which has deteriorated.
The ratings cuts for these three banks follow Moody's previous downgrades in September of Credit Agricole and Societe Generale.
Part of the problem with liquidity comes from the fact that many money market funds in the United States have refused to lend to European banks since the summer. That has made it difficult for eurozone banks to maintain borrowing in U.S. dollars.
The European Central Bank on Thursday announced new measures to make sure that eurozone banks do not run out of cash.
During the past few months, both BNP and Societe Generale announced asset sales aimed at reducing their reliance on short-term wholesale funding.
However, Moody's cautioned that if too many European banks try to sell assets at the same time it would depress their value and result in selling them at a loss.
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World - Moody's Downgrades Top Three French Banks | Global Viewpoint