French close to accord on Credit Lyonnais deal

 

AGREEMENT was reported near on a new salvage plan for ailing state owned bank Credit Lyonnais yesterday but the French finance ministry would not confirm any progress.

A "consensus is developing in government circles to help the bank, said a source close to negotiations between the government and Credit Lyonnais, which owns 53 per cent of Wodchester Bank.

The talks are aimed at saving the bank from an ignominious plunge back into the red as a result of a state bailout last year that has gone badly awry.

The solution was said to centre on bank chairman Mr Jean Peyrelevade's favoured option which would free the bank of the financial burden of helping finance its own rescue.

The government and the bank, bailed out by the state in 1994 and 1995, have been in a race against time to come up with new salvage terms before Credit Lyonnais's board meets on September 26th to approve its half year results.

Business daily Les Eclios reported yesterday that Mr Peyrelevade had written to the government vowing to quit unless accord was reached by today but it added the threat was unlikely to be carried out as progress was being made.

The source close to the talks said the letter was written in July when discussions were dead locked. "I doubt he will resign because he knows things are coming to a solution. Things are going quite quickly."

Le Monde also reported a deal was close and said the main stumbling block was the 10 billion French francs (£1.21 billion) it would cost the deficit fighting government this year.