Moody's downgrades top three French banks

Credit rating agency Moody's Investors Service lowered credit scores for three of the largest banks in France Friday. Moody's lowered long-term ratings for Societe Generale, BNP Paribas and Credit Agricole by one notch, to A1 for Societe Generale, and to Aa3 for both BNP Paribas and Credit Agricole, the rating agency's Web site said. Moody's top rating is Aaa, then Aaa1,2or 3, which are high-grade, followed by A1,A2,A3 which are upper-medium grade. Moody's said "liquidity and funding conditions have deteriorated significantly" for the banks and they were facing pressure finding funding on the open markets. It's likely the banks "would benefit from government support if needed," Moody's said and it is very likely the government would intervene. The French government has a history of stepping in to support its banks. French officials already said they were prepared to backstop the banks if necessary. The rating shift came one day after the European Banking Authority pronounced the banks sound after conducting stress tests that evaluated how the banks would stand up to various economic downturns. The rating service said it was concerned the conditions in Spain, Greece and Italy could deteriorate further, which would mean the French banks would suffer deeper losses on the government bonds they hold. The ratings are tied to the summit meeting in Brussels which concluded Friday in which all 17 members of the eurozone and six countries that are expected to adopt the euro agreed to tighter fiscal discipline. The agreement includes a $266 billion provision for the International Monetary Fund, which will be directed to use the funds to support debt-burdened member states.