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Bank shares tumble after BNP Paribas downgrade

French banking shares fell sharply on Friday, a day after ratings agency Standard and Poor's downgraded giant BNP Paribas.

Bank shares tumble after BNP Paribas downgrade
Photo: Thierry Caro

In morning trading, shares in BNP Paribas slumped 2.99 percent to 38.44 euros, Societe Generale fell 2.91 percent to 24.16 euros and Crédit Agricole 2.52 percent to 5.85 euros in a Paris market down by 0.49 percent.

Late on Thursday, S&P downgraded three French banks and placed 10 others on negative outlook including Crédit Agricole and Société Générale.

"In our view, the economic risks under which French banks operate are increasing, leaving French banks moderately more exposed to the potential of a more protracted recession in the eurozone," S&P said in a statement explaining its action.

In its decision, S&P lowered its long-term rating on BNP Paribas to "A+" from "AA-", while knocking down smaller players Banque Solfea to "A-" from "A" and Cofidis to "BBB+" from "A-".

S&P said the downgrades "reflects our view that these groups are more vulnerable to the impact of rising economic risks in the eurozone, particularly in France and countries in southern Europe due to their geographic concentrations in these markets."

S&P also revised the outlook to negative from stable on nearly a dozen banks including lending majors such as Allianz Banque, BPCE, Crédit Agricole
and Société Générale.

The change in outlook means S&P could subject these banks to a downgrade in the medium term.

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BANKS

French banking giant to pay US €700m in fines

French bank Credit Agricole has agreed to pay €700 million ($800 million) to the US to settle charges it conducted illegal business in Iran and other sanctioned countries, reports have claimed.

French banking giant to pay US €700m in fines
Photo: AFP

The settlement will be announced this week, possibly as soon as Tuesday, the person said. The deal with the US Department of Justice and other agencies is a deferred prosecution agreement and does not require Credit Agricole to plead guilty.

US authorities accuse the bank of illegally handling billions of dollars in transfers for entities from countries under US sanctions like Sudan, Cuba and Iran between 2003 and 2008.

 Some of the bankers responsible for the wrongdoing have already been dismissed, while one employee is still with the French bank and is expected to be dismissed, the person said.

Besides Justice, the agencies involved in the settlement are the Treasury Department, the Federal Reserve and the New York Department of Financial Services.

Rival French bank BNP Paribas was ordered to pay a record $8.9 billion fine earlier this year for similar violations in the long-running US investigation of European banks for illicit dollar transactions with countries under US sanctions.

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