The president of the French Banking Federation (FBF), Daniel Baal, expects a downgrade of the French debt rating by Moody’s on October 24, which will cause a slight increase in the cost of bank loans. “There is a budgetary situation that Moody’s, like Fitch before, considers very worrying for France today,” declared the manager on the set of BFM Business.
“We can expect (…) a downgrade of France’s sovereign rating by Moody’s,” as its competitor Fitch did on September 12. Consequently, banks will borrow more expensively the money they then lend to companies and individuals, warned Daniel Baal, also director of Crédit Mutuel. The latter, however, believes that the effect would be limited.
Budget deterioration
“Which is obviously not good news, because it means that, behind this, the rates charged to customers are also at risk of increasing,” he continued, and banks pass on this increase to preserve their margin. France, trying to emerge from an unprecedented political crisis in the Fifth Republic, nevertheless offered itself a small respite on Thursday, as Lecornu’s government narrowly escaped censure.
But the budget situation remains tense and there is still a long way to go to finalize the 2026 budget by the end of the year. Opening the way for the rating agencies’ autumn reviews, Fitch on September 12 downgraded France’s sovereign rating to A+ (equivalent to 16/20) with a stable outlook, punishing the country for its persistent political instability and budgetary uncertainties that hinder the consolidation of its badly degraded public accounts. Moody’s downgraded France’s rating by one notch in December 2024. The agency ranks it at Aa3, the equivalent of 17/20, with a stable outlook. He had refrained from writing it last April.
Source: BFM TV
