Credit Lyonnais Selloff Plan To Be Tabled This Week

France said on Tuesday it would submit a plan to privatise struggling state-owned bank Credit Lyonnais to the European Commission later this week for approval but its cost would not be known until it was implemented.

Some newspapers have said the Centre-Right government may have to pour 30 billion francs ($5.2 billion) into the bank to ready it for sale. But a finance ministry official called such figures pure speculation.

We wont know (the full cost) until weve started to put the plan into operation, the official said.

The cost of the rescue is expected to partly reflect the size of capital losses from asset disposals demanded by the Commission in exchange for approving new state aid.

 

Finance Minister Jean Arthuis promised to submit the plan, already weeks overdue, at a meeting on Monday with European Competition Commissioner Karel Van Miert in Brussels.

He said it was aimed at boosting the banks competitiveness and the objective is the privatisation of Credit Lyonnais.

The state will take the necessary measures toward this goal in close, confident, cooperation with the European Commission, he told reporters, declining further comment.

Once the countrys flagship bank, Credit Lyonnais has already received billions of francs in state money after a lending spree that backfired and led to huge losses.

I hope this revolting experience will pass the message to the nation that the state should not be a shareholder, Arthuis told a national committee hearing on Tuesday.

The Commission could take four months to consider the bailout which the government has vowed will be the last. We may be looking at June to hear from the Commission, said a source.

The Commission has already said it is concerned at the money poured into the bank and French bank Societe Generale on Monday announced plans for a legal challenge and demanded the government consider a controlled liquidation of the bank.

The fresh state aid would be on top of 45 billion francs the bank got from taxpayers in 1995 and 3.9 billion francs in emergency help it received last year to allow it to post a modest 1996 first-half profit of 67 million francs.

Newspapers have said 15 to 20 billion francs in new money would be needed to scrap heavy financial penalties imposed on the bank under the 1995 rescue. The rest would be needed to recapitalise it and boost ratios to attract a buyer. The ultimate bill to taxpayers from the Credit Lyonnais saga is expected to be well over 100 billion francs.

The Commission has been pushing Credit Lyonnais to step up asset sales to comply with conditions it slapped on the bank in exchange for approval of the 1995 rescue. It is likely to demand further sales for approving more help.