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European Crisis resumes with French Financial Sector facing Ratings Cut over Balance Sheet Concerns

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The European Crisis which had been put into the backburner over the past week has resumed after the Much Ado about Nothing – Yuan Appreciation games.The Greek Contagion biggest potential casualty would have been the French Financial Sector which has a massive exposure to Greek Bonds.One of the reasons being responsible for the Trillion Dollar Bazooka Rescue of Greece was the susceptibility of the German and French Financial Sectors.This would have led to a domino effect leading to a European versioin of Lehman crisis.

The European Banks have already taken huge losses due to Housing Crisis in the US .Another hit in the form of haircuts taken in sovereign bonds from the PIGS would have been catastrophic.The Spanish Cajas are already proving to be somewhat akin to the subprime sector for the Spanish Banking sector.This has already led to a 100 Billion Euro rescue fund from the Spanish government as Spanish banks find it difficult to access foreign funding.Now the spotlight has turned from the Spanish woes to the French banking sector.Note the French Banking Sector has already been in the limelight for their weak controls highlighted by the SocGen Trading Scandal.Fitch has brought the concerns over the Balance Sheet quality of the Too Big Too Fail French Banks into focus cutting the rating of French Super Bank BNP Paribas.Fitch has cut the rating of the bank based on its poor asset quality and high dependence on investment banking revenues.The stress test of the European Banking Sector has been touted as the test which will remove doubts about the solvency of the banks.However it remains to be seen if investors believe in these tests which will b surely paint the European Banks capital adequacy in rosy terms.

European banks under pressure after BNP downgrade – MarketWatch

European banking stocks were mostly lower Tuesday after Fitch Ratings’ downgrade of BNP Paribas fanned the flames of market fears about lenders’ balance sheets.Announcing its downgrade after European markets closed Monday, Fitch said the move was based on a combination of BNP’s high exposure to corporate and investment banking, a decline in asset quality and its slightly below average capital levels.The agency cut the bank’s issuer default rating by a single notch to AA- from AA with a stable outlook.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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