The French government’s financial arm will grant an emergency loan of up to 10 billion euros (US$12.8 billion) to the country’s banks to help them weather the global financial crisis, newspapers reported yesterday.
The Deposits and Consignation Fund (CDC) will make a first bridging loan of 5 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 5 billion euro loan will be made available on Oct. 31 if the banks still have a pressing need for cash, La Tribune reported. The loan would have to be repaid by Dec. 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 Co was created to borrow money through bonds, with state guarantee, and in turn loan that money at a higher rate to banks lacking financing.
France announced on Monday it would make 10.5 billion euros 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 recapitalize fragile banks. It would also make available up to 320 billion euros in inter-bank loan guarantees.
Meanwhile, the Brazilian government announced on Wednesday it will allow two state-controlled banks to buy stakes in private financial institutions, hoping to limit damage from the global crisis.
The Banco do Brasil and Caixa Economica Federal will be able to buy stakes in other banks, insurance firms and other private institutions needing aid, Brazilian Finance Minister Guido Mantega said.
“We want to facilitate liquidity and give more alternatives to the private institutions,” he said.
The institutions previously were not allowed to seek help from the state-controlled banks.
The provisional measure signed late on Tuesday by Brazilian President Luiz Inacio Lula da Silva also lets the central bank swap currency with other central banks across the world.
“It’s a preventive measure,” central bank President Henrique Meirelles said. “Right now there is no need for that, but it is an instrument we are making available.”
Mantega reiterated that Brazil’s financial system is “solid” and that “banks are not going bankrupt.”
On Tuesday, Lula said for the first time that the world economic crisis might eventually force changes in Brazil’s budget.
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