MorningSong
20th September 2011, 14:48
Italy credit downgraded, French banks pressured
(Reuters) - Standard & Poor's cut Italy's credit rating on Tuesday in a surprise move that increased strains on the debt-stressed euro zone and raised pressure on policymakers to take more decisive action to resolve the crisis.
Analysts said the one-notch downgrade, citing poor growth prospects and political instability, was ominous for the global economy and would add to mounting strains on European banks.
S&P's rating is now three notches below rival agency Moody's, putting Italy below Slovakia and on a par with Malta.
In the latest signs of stress on the banking system due to the debt crisis, three sources said Bank of China had stopped foreign exchange forwards and swaps trading with the top three French banks and Switzerland's UBS.
A Paris-based source said German engineering giant Siemens withdrew an unknown amount in deposits from Societe Generale in July. SocGen came under fierce market pressure in early August. The bank declined comment.
Italy's downgrade overshadowed signs of progress in Greece's negotiations with international lenders to avoid running out of money within weeks, and news that Brazil was willing to pump in $10 billion through the IMF to aid Europe.
"Italy is a much bigger deal than Greece," said Kathy Lien, director of currency research at GFT in New York.
Europe has come under increasing global pressure to resolve a crisis that has seen numerous sovereign rating downgrades and financial rescues for Greece, Portugal and Ireland. A bail out of Italy would overwhelm euro zone resources.
The Bank of China's decision to stop foreign exchange forwards and swaps trading with SocGen, BNP Paribas and Credit Agricole reflected a broad unease about counterparty risk in the euro zone crisis, three sources with direct knowledge of the matter said.
French banks are among the most heavily exposed to Greece, which many economists expect to default at some point. Shares in SocGen and BNP were both down more than three percent.
The head of the European Central Bank, Jean-Claude Trichet, urged in a newspaper interview that European banks strengthen their balance sheets to improve their resistance to the crisis.
Analysts said the crisis will have to be addressed by policymakers starting with the U.S. Federal Reserve Board meeting on Tuesday and Wednesday and the G20 and IMF/World Bank in Washington later in the week.
"I think it's going to necessitate some sort of action by the G20 this weekend," said Lien......
Continue reading at:
http://in.reuters.com/article/2011/09/20/idINIndia-59435420110920
(Reuters) - Standard & Poor's cut Italy's credit rating on Tuesday in a surprise move that increased strains on the debt-stressed euro zone and raised pressure on policymakers to take more decisive action to resolve the crisis.
Analysts said the one-notch downgrade, citing poor growth prospects and political instability, was ominous for the global economy and would add to mounting strains on European banks.
S&P's rating is now three notches below rival agency Moody's, putting Italy below Slovakia and on a par with Malta.
In the latest signs of stress on the banking system due to the debt crisis, three sources said Bank of China had stopped foreign exchange forwards and swaps trading with the top three French banks and Switzerland's UBS.
A Paris-based source said German engineering giant Siemens withdrew an unknown amount in deposits from Societe Generale in July. SocGen came under fierce market pressure in early August. The bank declined comment.
Italy's downgrade overshadowed signs of progress in Greece's negotiations with international lenders to avoid running out of money within weeks, and news that Brazil was willing to pump in $10 billion through the IMF to aid Europe.
"Italy is a much bigger deal than Greece," said Kathy Lien, director of currency research at GFT in New York.
Europe has come under increasing global pressure to resolve a crisis that has seen numerous sovereign rating downgrades and financial rescues for Greece, Portugal and Ireland. A bail out of Italy would overwhelm euro zone resources.
The Bank of China's decision to stop foreign exchange forwards and swaps trading with SocGen, BNP Paribas and Credit Agricole reflected a broad unease about counterparty risk in the euro zone crisis, three sources with direct knowledge of the matter said.
French banks are among the most heavily exposed to Greece, which many economists expect to default at some point. Shares in SocGen and BNP were both down more than three percent.
The head of the European Central Bank, Jean-Claude Trichet, urged in a newspaper interview that European banks strengthen their balance sheets to improve their resistance to the crisis.
Analysts said the crisis will have to be addressed by policymakers starting with the U.S. Federal Reserve Board meeting on Tuesday and Wednesday and the G20 and IMF/World Bank in Washington later in the week.
"I think it's going to necessitate some sort of action by the G20 this weekend," said Lien......
Continue reading at:
http://in.reuters.com/article/2011/09/20/idINIndia-59435420110920