French govt to loan 10 bn euro to banks

The French government's financial arm will grant an emergency loan of up to 10 billion euros ($12.8 billion) to the country's banks to help them weather the global financial crisis, newspapers reported today.      

The Deposits and Consignation Fund (CDC) will make a first bridging loan of five billion euros to a refinancing company formed to support French banks, the financial dailies Les Echos and La Tribune reported without citing any sources.      

The CDC would be reimbursed through stocks from the refinancing company.      

A second five-billion-euro loan will be made available on October 31 if the banks still have a pressing need for cash, La Tribune reported.

The loan would have to be repaid by December 31.      

Seven banks -BNP Paribas, Banque Populaire, Caisses d'Epargne, Credit Agricole, Credit Mutuel, HSBC and Societe Generale - will be eligible for the loan.      

The Economy Refinancing Company was created to borrow money through bonds, with state guarantee, and in turn loan that money at a higher rate to banks lacking financing.      

The government announced on Monday it would make 10.5 billion euros ($14 billion) available to leading banks to boost economic activity in the global credit squeeze.       

Lawmakers last week approved a 360-billion-euro overall package to support French banks.
Several European countries also agreed to plough capital into the hardest-hit banks and massively underwrite loans between financial players.       

Under that plan, the French state would provide 40 billion euros to recapitalise fragile banks. It would also make available up to 320 billion euros in inter-bank loan guarantees.