FRANCE HAS insisted it will not allow any of its banks to collapse as the country’s largest institutions move to reassure markets spooked by their exposure to Greek debt.
Amid speculation that Paris may have to act to shore up its banking system, the leader of President Nicolas Sarkozy’s centre-right UMP party, Jean-François Copé, said it was “out of the question that we would allow our banks to fall”.
“One must take an approach that is not ideological but pragmatic. If the state has to intervene, in whatever form ... it must be proportionate and fully co-ordinated with other European states that have the same problems with their own banks,” he said.
Having suffered further sharp declines yesterday morning, France’s biggest banks managed to stem the freefall and then saw their shares rebound after soothing markets with assurances on their funding.
BNP Paribas, the country’s largest lender, made up some of its earlier losses after it denied a report questioning its dollar funding position and said it was funding itself perfectly normally in dollars both directly and via currency swaps.
Its shares had fallen by 10 per cent yesterday morning after a Wall Street Journal column had cited an anonymous executive at the bank saying it no longer had access to dollar funding.
BNP Paribas said its exposure to Greek sovereign debt was just €3.5 billion, compared to its profits of €7.4 billion in the first half of 2011.
Société Générale, whose shares had fallen by 8 per cent and is considered the most fragile of the French banks, recovered after chief executive Frédéric Oudea said the bank’s exposure to European sovereign debt was “manageable” and that it could do without access to US money-market funds.
“For our bank the exposure to sovereign debt is low, absolutely manageable,” Mr Oudea said.
“We have plenty of buffers of liquidity and we are adjusting to the reduction in the money-market fund exposure.”
He also sought to assuage savers’ concerns, telling French radio there were “no concerns” and that their deposits were safe.
The bank said that it planned to sell assets to free up €4 billion ($5.5 billion) of capital by 2013 in an effort to reassure investors about its finances.
Central bank governor Christian Noyer endorsed the banks’ positions, insisting they did not have liquidity or solvency problems.
“Whatever the scenario is in Greece ... the French banks have the means to deal with it,” said Mr Noyer.
These assurances, along with reports of a conference call scheduled today between Mr Sarkozy, German chancellor Angela Merkel and Greek prime minister George Papandreou, gave a boost to shares in all major French banks in the afternoon.
Société Générale, which on Monday hit its lowest level since the 2009 recession, saw it shares rise 15 per cent.
Crédit Agricole, which is exposed through its Greek subsidiary Emporiki, gained 6.7 per cent.
France’s financial institutions are heavily exposed to troubled euro zone states, particularly Greece, Spain and Italy, and have been severely punished for it by investors in recent months.
Société Générale’s share price has fallen about 70 per cent since February.
Crédit Agricole – the country’s third biggest bank – is down by 60 per cent.
