The French government on Friday detailed Eu28bn of guarantees for the Crédit Immobilier de France group after Fitch earlier in the day had affirmed CIF Développement’s issuer default rating but cut its Viability Rating from ‘c’ to ‘f’.

In documents accompanying its budget announcement, the French ministry of economy and finance said that the state had decided to grant guarantees to CIF to avoid it having to file for bankruptcy and to prevent a disorderly default, which would have undermined the stability and financing of the French economy.

The guarantees are composed of two elements: Eu12bn of guarantees on internal group deposits with 3CIF to allow the flow of liquidity within the group; and Eu16bn of guarantees for new issues from Caisse Centrale du Crédit Immobilier de France (3CIF).

The guarantees are subject to a fee and prior authorisation by the European Commission.

Fitch affirmed at A the long term issuer default rating (IDR) of Crédit Immobilier de France Développement on Friday, which applies to other entities of the group including 3CIF because of a cross-support mechanism in place, but cut CIFD’s Viability Rating from c to f.

Fitch downgraded the bank’s Viability Rating (VR) from ‘c’ to ‘f’ because it considers that it would have defaulted had it not received a strong commitment from the French state to help refinance in the short term.

“This is underlined by CIFD requiring a guarantee by the French state in order for the bank to meet its financial liabilities,” said Fitch.

The French finance minister at the beginning of September announced that the CIF group would receive a guarantee from the state in light of the failure of attempts to find a buyer for the group and increasing pressure on its financial situation.

The lower VR of ‘f’ for CIFD reflects Fitch’s view that the bank has failed and is no longer viable, said the rating agency.

“It is unable to source funds from the market, which is almost its exclusive source of financing, and needs a state guarantee to meet its future debt obligations,” it said.

Fitch said that CIFD’s IDRs, Support Rating (SR) and Support Rating Floor (SRF) are underpinned by the rating agency’s belief in the French state’s strong willingness to help CIFD meet its financial obligations.

It considers a run-off of CIFD’s activities to be the most likely option for the bank, but that the French state’s announcement of the provision of a guarantee to the bank is a strong indication of the state’s high propensity to support CIFD in meeting its financial obligations.

“According to the French state, such support requires the French Parliament’s and the European Commission’s approvals,” said Fitch, “both of which Fitch expects to be forthcoming.

“In the unlikely event that approval was not given, Fitch would reassess CIFD’s IDRs.”

If a run-off of the bank was confirmed, Fitch said it would likely withdraw the VR once this was approved by the French and European authorities.

The rating agency said that it would review the IDRs of entities such as Crédit Immobilier de France (3CIF), the group’s main refinancing arm, if they were sold or left CIFD’s cross-support mechanism.