September 13, 2011
Europe's banks, burdened by concerns about exposure to ailing Greece, took a perilous turn Monday despite efforts by the biggest of them to calm panicked investors.
France's financial system was especially hard hit, with shares in its three largest banks all falling more than 10%, as concerns about Greek default continued to cascade across Europe. European banks are cutting back on dollar-denominated loans, a troublesome sign of credit contraction at a time when American and European economies can least afford it.
Underscoring the pressure banks face, Société Générale SA Chairman and Chief Executive Frédéric Oudéa held a morning conference call Monday to quell concerns and say that bank was well funded. Still, the French bank said that in addition to reducing its dollar-denominated debts, it is laying off workers and will speed up the sale of some investments to free up cash.
That wasn't enough to soothe investors. Shares of Société Générale, BNP Paribas SA and Crédit Agricole all tumbled Monday, and have seen their values fall by about half since July.
The pressure on the banks is intimately linked to Europe's sovereign debt crisis. Financial markets are now anticipating a default by Greece, a step that would generate losses at European banks and deepen worries about whether other governments in the 17-nation euro-zone will be able to repay their debts.
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