Moody’s warned yesterday (Thursday) that its A1 rating of Caisse Centrale du Crédit Immobilier de France (3CIF) could fall to close to Caa1 if France’s public sector fails to provide short to medium term financial support and a longer term solution is not achieved, although it said that positive outcomes are “highly likely”.

The rating agency downgraded the standalone bank financial strength rating (BSFR) of 3CIF from C/a3 to E/caa1, outlook developing, yesterday and maintained its A1 long term rating on review for downgrade, its status since 15 February.

Moody’s noted that the long term rating now incorporates 12 notches of systemic support, compared with two notches previously, saying that its view is that the French public sector is highly likely to provide both financial support over the short to medium term and assistance in orchestrating a longer term adaptation of 3CIF’s business model, which it said is “currently unviable”.

“Should such support not be forthcoming promptly, or should attempts to achieve a longer-term solution fail, Moody’s would expect 3CIF’s long term debt rating to transition down close to Caa1 (the standalone financial strength rating implied by 3CIF’s BFSR),” it added.

Trading in bonds issued by 3CIF and CIF Euromortgage, which issues obligations foncières on behalf of the group, was suspended on 8 May at the request of France’s Autorité des Marchés Financiers and Luxembourg’s Commission de Surveillance du Secteur Financier, noted Moody’s.

No official information has been forthcoming on the reason for the suspension or the situation of the CIF group since the trading suspension, although Banque de France governor Christian Noyer was reported to have said on Monday that CIF’s solvency level was very satisfactory and that French supervisory authority ACP, of which Noyer is chairman, was looking for a lasting solution for the bank.

Press reports have suggested that CIF’s auditors had refused to sign off on its 2011 accounts given an anticipated downgrade from Moody’s of up to four notches and fears that the group’s business model would be unviable – something Moody’s declared in its release yesterday.

“While 3CIF’s interest margin and asset base have shown some resilience throughout the recent crisis, its business is entirely wholesale-funded, thus making it vulnerable to debt market disruptions and to loss of investor confidence,” said the rating agency. “The firm currently has very limited access to private-sector financing, and the rating agency sees no prospect of that changing in the foreseeable future.”