France’s six biggest banks receive €10.5bn cash injection

publication date: Oct 21, 2008

The six biggest banks in France will receive a combined €10.5 billion (£8.2 billion) in government support before the end of the year. At a press conference yesterday, the country’s Finance Minister, Christine Lagarde, said her government would subscribe to banks’ subordinated debt issues but will not take up shares or voting rights. In return, the beneficiaries will need to increase lending to companies and households.

Ministers have stressed that the injection of cash is not aimed at improving the tier one ratios of French banks but rather at easing lending. BNP Paribas, Société Générale, Crédit Agricole, Crédit Mutuel, Caisse d’Epargne and Banque Populaire will be tapping into the €1.3 trillion fund set up by the governments of France, Germany, Spain, the Netherlands and Austria earlier this month. The governments acted jointly to prevent the collapse of financial systems in the fall out from the failure of Wall Street investment bank, Lehman Brothers, in mid-September.

According to Madame Lagarde, the French taxpayer can expect the securities purchased in the banks to generate substantial revenue. The minister has also indicated that a further €10.5 billion could be available to French banks next year. In related news, Dutch bank ING secured a €10 billion injection of cash from the government of the Netherlands over the weekend.