Shares in Société Générale, BNP Paribas and Crédit Agricole rose sharply on Thursday morning after it emerged that French banks would only have to find another €8.8bn to cover their part of the €106bn capital shortfall among lenders identified by Europe’s leaders.
France’s banks have been heavily punished by investors in recent months because of their exposure to Greek sovereign debt, with SocGen coming under particular attack because of its subsequent difficulties in securing cheaper short-term financing from the US.
Senior French politicians and financial leaders stressed again on Thursday that the country’s banks would be able to meet the new capital requirements without having to raise new funds from the markets or tapping their government. SocGen has been told to find another €3.3bn and BNP another €2.1bn.
François Baroin, the finance minister, said: “French banks can use their own profits. And we’ll make sure that the reduction in their balance sheets comes first and foremost at the expense of dividends and bonuses,” he said.
Shares in SocGen and BNP were both about 8 per cent higher in mid-morning Paris trading.
As part of the latest deal to stem the spread of panic arising from the Greek debt crisis, agreed in Brussels on Wednesday night, the European Banking Authority will require around 70 banks to meet a higher 9 per cent threshold of the “highest quality capital”, after revaluing sovereign debt at market rates.
BNP said that it would comfortably be able to meet the new “tough” threshold without recourse to the markets. Frédéric Oudéa, chief executive of SocGen, had said on Wednesday that his own bank would also be able to meet any new capital requirements from its own funds.
French banking leaders will hope that the latest EBA demands will put an end to the attacks on their shares, which they claim are without foundation.
However, the €8.8bn shortfall identified for four French banks, compared to €5.2bn for 13 lenders in Germany, is significantly below some analysts’ predictions.
A key test will be whether details of the plan – including the definition of capital and the method used to mark down sovereign debt – stand up to close scrutiny from analysts.
Of the €106bn capital shortfall identified, €79bn is attributable to the eurozone’s so-called “peripheral” economies, with Greece (€30bn) and Spain (€26.2bn) topping the list, followed by Italy (€14.7bn) and Portugal (€7.8bn). Most of the capital required in Greece and Portugal is already covered by existing bail-out programmes.