Wednesday, October 12, 2011

France Will Protect Its Banks

It isn't clear whether this is a French plan or a European plan that has been prematurely announced by France:

Alain Juppé, the French foreign minister, told the National Assembly that several leading French banks like BNP Paribas, Crédit Agricole and Société Générale, which are deeply exposed to the sovereign debt of Greece and other Southern European countries, would move to increase their capital reserves, initially by using their own revenue or through the financial markets. Money from the government would be drawn upon only as “a last resort,” he said, according to Reuters.
But Mr. Juppé said that the move, which was agreed upon with Germany during talks on Sunday, meant the banks’ best buffers against losses — so-called core Tier 1 capital — would increase to 9 percent or higher, from 7 percent, by 2013.
It was unclear whether any of that money might be drawn from the proposed euro zone bailout fund rather than directly from French government funds.
The issue is particularly sensitive in France because of fears that the country could lose its triple-A credit rating if it had to inject billions of euros into its banks. That would be a huge political setback for the French president, Nicolas Sarkozy, who faces election next year.

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