Fitch: Prime MMF Ratings Unaffected by French Bank Downgrades
NEW YORK -- July 22, 2013
Ratings assigned by Fitch to U.S. prime money market funds (MMFs) are
unaffected following our recent action downgrading France's rating and
subsequent downgrades of certain French financial institutions.
Fitch observed the downgrade of French bank ratings had a modest impact on the
Portfolio Credit Factor (PCF) of funds investing in the affected banks.
Average PCF increases from 1.10 from 1.15, but is well below the 'AAAmmf'
threshold of 1.50. The impact to PCF was greater for some funds depending on
the level of exposure, but in all cases funds have managed French exposures so
that they remain under 1.50. The PCF is an asset-weighted average measure of
credit risk in terms of credit quality and maturity, which increases as credit
On July 12, 2013, Fitch downgraded France's long-term foreign and local
currency issuer default ratings (IDR) to 'AA+' from 'AAA' while the Rating
Outlook remains Stable. At the same time, we affirmed France's short-term
foreign currency IDR at 'F1+' and the country ceiling at 'AAA' (see: "Fitch
Downgrades France to 'AA+'; Outlook Stable"). Following the downgrade of
France's IDR, Fitch downgraded the ratings of the following banks that
Fitch-rated MMFs had exposure to at June 30, 2013: Credit Agricole, Societe
Generale, Groupe BPCE, and BNP Paribas (see: "Fitch Downgrades Major French
Fitch's MMF rating criteria relies primarily on issuers' short-term ratings
for the purposes of assessing credit quality and diversification. The
short-term ratings of the French exposures of Fitch-rated MMFs remain at or
above 'F1' and so funds remain consistent with the credit quality and
diversification criteria for funds rated 'AAAmmf'.
Fitch rates 20 prime U.S. MMFs with aggregate assets of approximately $364
billion. As of the end of June 2013, 90% of Fitch-rated prime MMFs had
exposure to short-term securities issued by French financial institutions. The
average exposure was 8.3% of portfolio assets. Most of the exposures are
concentrated in three French banks: Societe Generale (rated A+/F1+), BNP
Paribas (rated A+/F1+), and Credit Agricole (rated A+/F1+). Direct exposure to
French banks is on average 6.3% of assets, through certificates of deposit,
CP, time deposits, and nontraditional repurchase agreements. For direct
exposures, the average maturity was 27.7 days. The remaining 2.0% is held
indirectly through ABCP programs and traditional repurchase agreements.
Fitch conducted a similar review of 42 European MMFs' exposures to French
banks as part of a recent sector-wide rating review. For more information see
"Fitch Affirms Ratings on 42 European Money Market Funds".
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article, which may include hyperlinks to
companies and current ratings, can be accessed at www.fitchratings.com. All
opinions expressed are those of Fitch Ratings.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.
Gwen Fink-Stone, J.D.
Fund and Asset Managers
One State Street Plaza
New York, NY 10004
+1 212 908-9128
Fund and Asset Management
+1 212 908-0232
+1 212 908-9123
Sandro Scenga, New York, +1 212-908-0278
Press spacebar to pause and continue. Press esc to stop.