The French government will inject 10.5 billion euros into six largest banks to stimulate economic activity, given the frozen international credit markets, officials stated.
Three billion euros will go to the largest French bank Credit Agricole, followed by BNP Paribas with 2.55 billion euros, and Societe Generale with 1.7 billion, said Finance Minister Christine Lagarde after a meeting with bank leaders. The initiative also includes Credit Mutuel, which will receive 1.2 billion euros, Caisse d’Epargne (1.1 billion euros), and Banque Populaire (950 million), Lagarde further stated. As part of efforts across Europe where governments are assisting banks severely affected by the financial crisis, French lawmakers last week approved a 360 billion euro recapitalization package for banks.
According to that plan, the government will inject 40 billion euros in capital into banks, while up to 320 billion euros in aid will be in the form of guarantees for interbank borrowing to overcome the credit crisis. However, the governor of the French central bank, Christian Noyer, emphasized that banks do not lack capital and that government intervention in the form of capital injection is not necessary. “The aim of this initiative is not the recapitalization of banks but financial support for the economy,” he said. The announced funds are aimed at increasing the capital of banks so they can compete with their counterparts in other countries whose governments have rescued their leading lenders from collapse. President Nicolas Sarkozy stated that he will not allow the collapse of any French bank and that French savers will not lose a single euro due to global upheavals caused by last month’s collapse of the American investment banking giant Lehman Brothers.
