French Banks Under Pressure Amid Fears of Greek Default
Yesterday, French banks faced a new round of scrutiny despite a statement from the central bank governor, Christian Noyer, that their capital levels were adequate. However, a Reuters report that an Asian bank had cut its credit lines to French banks and five Asian banks were reviewing their exposure to France sparked a sharp sell-off in shares of Societe Generale, BNP Paribas, and Credit Agricole. Analysts drew comparisons to the 2008 financial crisis, citing persistent fears about bank stability and credit market woes.
Key Takeaways:
- Shares in Societe Generale, BNP Paribas, and Credit Agricole dropped sharply due to rumors of Asian banks cutting credit lines and reviewing exposure to France.
- Credit market conditions are deteriorating, with analysts warning that the market is "substantially broken."
- Long-only funds are cutting their exposure to banks, and Aegon sold down its investments in BNP Paribas, Unicredit, Credit Agricole, and KBC.
- Societe Generale's CEO, Frederic Oudea, dismissed rumors of the bank's financial difficulties as a "complete fantasy."
- Investors fear that Societe Generale may need to raise approximately 3 billion euros to meet new global capital standards if the eurozone debt crisis deepens.
Statistics:
- Societe Generale lost 4.9 billion euros in the 2008 Jerome Kerviel rogue trader scandal.
- The bank's shares closed up 3.7% to 23 euros.
- Five Asian banks are reviewing their exposure to France.
- Long-only funds are cutting their exposure to banks.
Sources:
- "French banks under pressure despite central bank assurances" by Rupert Neate and Kim Willsher, The Telegraph
- Reuters report
- Aegon Asset Management press release
- Societe Generale press release