Fitch: Prime MMF Ratings Unaffected by French Bank Downgrades

  Fitch: Prime MMF Ratings Unaffected by French Bank Downgrades

Business Wire

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
quality decreases.

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
Banks").

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.

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Contact:

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