State rules out rescue of Credit Lyonnais

THE French finance ministry ruled out a third state rescue of Credit Lyonnais yesterday as it called on the state controlled bank to accelerate the cleanup of its finances.

"We have excluded the possibility of a third rescue plan we are sticking to the plan approved" by Brussels," said a ministry official who declined to be named.

At the same time, he urged the country's largest bank - which owns 53 per cent of Woodchester Bank - to "step up its restructuring efforts" in the face of France's gloomy banking climate.

The comments followed press reports that Credit Lyonnais might plunge back into the red again after barely breaking even in 1995 and that the government would be forced to mount a third rescue of the bank after bailing it out twice in the past two years.

The bank - brought to the brink of collapse by an reckless expansion binge - reported last month a slim 13 million franc (£1.63 million) profit for 1995 after accumulating Ffr21 billion in losses between 1992 and 1994.

The bank warned at the time it released the figures that 1996 would be "more difficult" than 1995 because of "weak demand for credit and steadily shrinking margins". Bank chairman, Mr Jean Peyrelevade said measures to deal with the situation will be necessary" but did not specify what might be required.

Any further state help would enrage its private sector rivals which have complained bitterly that the rescue was too generous and distorted competition. One, Societe Generale, has challenged it in the European Court of Justice.