France to release new bank rescue funds

9th January 2009, Comments 0 comments

French finance ministry announced EUR 10.5 billion will be released in March to shore up the country’s six biggest banks.

PARIS – France is to release a second tranche of EUR 10.5 billion by March to help recapitalise its banks, part of a massive rescue for the sector, the finance ministry said Thursday.

The French government has offered up to EUR 40 billion in capital to shore up its banks and keep credit flowing to the French economy, with EUR 10.5 billion already set aside for France's six biggest banks.

President Nicolas Sarkozy said Wednesday the government intended to "go beyond the first tranche of capital loaned in December".

"We will lend them the capital, so that they can offer more loans," he said in a New Year's address to French lawmakers.

An official at the finance ministry confirmed the funds would be made available, saying: "We are working on the first quarter."

Contacted by AFP, France's main banks said they would decide based on market conditions whether to take advantage of the new funds, offered in the form of an eight-percent interest loan.

In December, The European Commission approved France's plans to recapitalise its banks, after revising its rules on bank bailouts under pressure from European Union member states.

The French funds are part of a package of capital injections and loan guarantees worth a total of EUR 360 billion, announced in October to help the sector weather the global credit crunch.

In exchange for the state help, French banks have pledged to increase by three to four percent their loans to households and businesses.

[AFP / Expatica]

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