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Rating Action:

Moody's downgrades Societe Generale's ratings to Aa2/B- from Aa1/B

24 Jan 2008
Moody's downgrades Societe Generale's ratings to Aa2/B- from Aa1/B

Outlook stable on the Aa2 and negative on the BFSR

Paris, January 24, 2008 -- Moody's Investors Service today downgraded Societe Generale (SG)'s bank financial strength rating (BFSR) to B- from B and its long-term debt and deposit ratings to Aa2 from Aa1. The outlook on the BFSR is negative while the outlook on the long-term debt and deposit ratings is stable. Subordinated and junior subordinated debts have been downgraded to Aa3 from Aa2 with stable outlooks. Super subordinated tier 1 instruments have been downgraded to A1 from Aa3 with stable outlooks. Short-term debt and deposit ratings are affirmed at Prime-1.

While the downgrade is primarily driven by the €4.9 billion loss caused by unauthorized rogue trading positions announced today it also follows SG's announcement of additional write-downs in excess of €2 billion in 4Q2007 related to the credit crisis. Moody's expects SG to report a significant net quarterly loss for the fourth quarter of 2007 but notes that SG has announced that it would remain marginally profitable for the full year 2007. Moody's also notes that SG has announced a capital increase of €5.5 billion.

Commenting on the additional write-downs announced by SG today, Moody's said that they were within the parameters of the stress test that it had performed on SG's sub-prime related exposures. Moody's used for SG the same criteria and parameters that it has applied to other rated financial institutions worldwide. The crisis-related write-downs alone would not have warranted a rating action by Moody's thanks largely to the group's substantial diversification. Nonetheless, the size of the crisis-related impairment highlights some weaknesses in SG's risk management, which Moody's intends to monitor closely.

Of greater impact on SG's creditworthiness is the unexpected large loss stemming from one single rogue trader. This loss evidences serious breakdowns in the chain of operational controls at SG. In light of this breakdown in controls and the magnitude of the loss Moody's has updated its overall assessment of the bank and lowered the BFSR to B-. The downgrade of the bank's long-term debt and deposit ratings is in line with the movement of the bank's BFSR, but the long-term ratings and their stable outlook also continue to reflect the systemic importance of the bank within the French banking system.

The negative outlook on the BFSR reflects Moody's concerns over the potential negative impact this rogue trading may have on the bank's Commercial and Investment Banking (CIB) franchise and reputation. A swift resolution of the control issues and an effective management of the potential negative perception around the CIB franchise may reset the outlook back to stable. Conversely, a prolonged internal resolution that would permanently impair the earning potential of the CIB franchise may lead to further negative pressure on the BFSR. The rating agency also said that it will continue to assess the appropriateness of SG's capital adequacy in light of the earnings volatility and of the impact of the bank's growth in strategic markets.

Moody's recognizes the bank's prompt decision to replenish its core capital base and notes its proven liquidity management capacity. Moody's assumptions underlying today's rating actions are:

a) the capital increase will take place in a rapid and timely manner,

b) the full extent of the rogue trade-related loss have been unveiled, and

c) SG will take the appropriate measures to ensure that control breakdowns of such a magnitude will not recur.

Moody's also notes that a further downgrade of SG's BFSR to C+ would not likely be followed by a similar movement of the Aa2 long-term debt and deposit ratings under present circumstances. The high degree of imputed systemic support leads to higher relative stability in the debt and deposit ratings despite changes in the bank's intrinsic financial strength. Consequently, the outlook assigned to the Aa2 long-term debt and deposit ratings remains stable.

Finally, Moody's cautions that today's rating action on SG's BFSR may have an impact on its various rated subsidiaries. An assessment of the creditworthiness of SG's subsidiaries will be completed shortly and may lead to separate rating actions and press releases if warranted.

Moody's took the following rating actions:

Societe Generale

- Bank Financial Strength Rating downgraded from B to B-. The outlook is changed from stable to negative;

- Long-term foreign currency deposit rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Long-term local currency deposit rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Long-term foreign currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Long-term local currency deposit rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Long-term foreign currency subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Long-term local currency subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Long-term foreign currency junior subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Foreign currency preferred stock rating downgraded from Aa3 to A1. The outlook remains stable;

- Local currency preferred stock rating downgraded from Aa3 to A1. The outlook remains stable;

- Short-term foreign currency deposit rating affirmed at Prime-1;

- Short-term local currency deposit rating affirmed at Prime-1;

- Short-term local currency senior unsecured rating affirmed at Prime-1.

Societe Generale (Canada)

- Backed long-term local currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable.

SG Australia Limited

- Backed long-term foreign currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Backed long-term local currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Backed long-term foreign currency subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Backed long-term foreign currency junior subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Backed short-term foreign currency rating affirmed at Prime-1;

- Backed short-term local currency rating affirmed at Prime-1.

Societe Generale North America, Inc.

- Backed commercial paper affirmed at Prime-1.

SGA Societe Generale Acceptance N.V.

- Backed long-term foreign currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Backed long-term foreign currency subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Backed long-term foreign currency junior subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Backed short-term foreign currency rating affirmed at Prime-1.

Societe Generale, New York Branch

- Long-term local currency deposit note/CD program rating downgraded from Aa1 to Aa2. The outlook remains stable.

SG Capital Trust I

- Backed foreign currency preferred stock rating downgraded from Aa3 to A1. The outlook remains stable.

SG Capital Trust III

- Backed foreign currency preferred stock rating downgraded from Aa3 to A1. The outlook remains stable.

SG II Preferred Securities Investors Trust

- Local currency preferred stock rating downgraded from Aa3 to A1. The outlook remains stable.

SG Preferred Capital II

- Local currency preferred stock rating downgraded from Aa3 to A1. The outlook remains stable.

SG Structured Products

- Backed long-term local currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Backed short-term local currency rating affirmed at Prime-1.

SG Option Europe

- Backed long-term foreign currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Backed long-term local currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Backed long-term local currency subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Backed long-term local currency junior subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Backed short-term local currency rating affirmed at Prime-1.

Societe Generale Australia Branch

- Long-term foreign currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Long-term local currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Foreign currency commercial paper rating affirmed at Prime-1;

- Short-term local currency rating affirmed at Prime-1.

Parsifal Limited

- Backed long-term foreign currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Backed long-term foreign currency subordinate rating downgraded from Aa2 to Aa3. The outlook remains stable;

- Short-term foreign currency rating affirmed at Prime-1.

Societe Generale Commodities Products LLC

- Backed long-term local currency senior unsecured rating downgraded from Aa1 to Aa2. The outlook remains stable;

- Short-term local currency rating affirmed at Prime-1.

Based in La Defense, France, Societe Generale reported €1,125 billion of consolidated total assets and shareholders' equity of €34.4 billion as of 30 June 2007.

London
Adel Satel
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Paris
Stephane Le Priol
Vice President - Senior Analyst
Financial Institutions Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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