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(Bloomberg) -- France’s banking stocks slid as a potential government collapse and deepening political crisis unsettled investors.

BNP Paribas SA — the country’s largest lender by market capitalization — fell as much as 3% while Societe Generale SA declined 4.4% and Credit Agricole SA slipped 2.8%, putting them among the worst performers across European financials.

The French government could break down in coming weeks as Prime Minister Michel Barnier faces a potential no-confidence vote that would oust him if it’s successful. His political survival hangs on whether the country’s far-right National Rally party will seek to force him out or choose to abstain after he pushes through next year’s budget, allowing him to remain in place and the budget to stand.

While systems exist that would allow the French state to function even without a budget, such an outcome would be a setback for the country’s efforts to rebuild credibility with investors.

The political uncertainty is fueling investor concerns, pushing the spread between France’s 10-year bonds and safer German equivalents to the highest in more than a decade.

“I wouldn’t go massively buying French financial stocks” at the moment, said Nicolas Simar, a senior equity fund manager at Goldman Sachs Asset Management. The sector is among the “most sensitive to a rise in the spread” between French and German bonds, along with utilities and telecoms firms.

French lenders have already largely missed out on this year’s rally in European banking equities, partly because of a retail market where banks are constrained in how quickly they can pass through higher interest rates.

Investors have also fled the country’s equities ever since President Emmanuel Macron’s surprise decision in June to call a general election, making the blue-chip CAC 40 Index a rare developed-market underperformer in 2024.

France’s bonds started to underperform early last week, and the current run of spread widening is the longest since 2022. Citigroup Inc. strategists said Tuesday that the gap may reach 100 basis points quicker than expected. Meanwhile, a credit gauge of the risk that the nation leaves the euro area reached a seven-year high.

--With assistance from Michael Msika.

(Updates with context throughout.)