FRANCE HAS denied reports that it had drafted a plan to inject up to €15 billion into its major banks amid fears over their heavy exposure to Greek debt.
The Journal du Dimancheyesterday reported that the state offered a €10-15 billion bank recapitalisation at a meeting earlier this month with senior officials from five institutions: BNP Paribas, Société Générale, Crédit Agricole, Banque Populaire-Caisse d'Épargne and Crédit Mutuel.
A sharp drop in the share prices of French banks since the beginning of the summer has led to speculation that the state may have to intervene and set up a recapitalisation fund, as it did during the 2008 global banking crisis.
Citing anonymous sources in the banking sector and “close to the Élysée”, the paper claimed the offer was made at a meeting at the finance ministry on September 11th, but was opposed by BNP Paribas.
The Élysée Palace and the finance ministry both denied the report, the president’s office saying such a plan was “absolutely not” in preparation and that the banks were well-funded.
Banque de France governor Christian Noyer said the country’s banks could handle any risk from their exposure to Greek sovereign debt with six months’ profits.
“They are very solid. They have a solid capital base, comparable to other European banks and they are profitable ... None of them is hiding any toxic assets,” he said.
Asked to comment on the recapitalisation reports, Mr Noyer said: “There is no plan, and we don’t need one.”
However, he added that if banks expressed the need for it, or in the case of an “extraordinary event”, they could appeal to a public support mechanism created in 2008.
The French government set up a plan that year that made €360 billion available to banks, €40 billion of which would go towards strengthening their capital base and €320 billion of which would help them refinance.
The government has maintained that, despite market concerns over its banks’ exposure, the institutions are capable of absorbing any major shock.
It stresses that the implementation of the euro zone deal of July 21st, which reinforced the zone’s rescue fund and allowed for a further €160 billion bailout for Greece, will calm the panic in the markets.
The French parliament has already approved the deal, and Germany is expected to follow suit this week.
“There is no reason to have an alternative strategy since the one we believe in is not yet in place,” finance minister François Baroin said last week.
