French banking federation admits dollar shortfall

5th September 2011, Comments 0 comments

French banks face difficulties in raising short-term cash in dollars, the head of France's banking federation said on Monday confirming a recent study by Moody's Investors Service.

While liquidity in euros posed no problem, "refinancing in dollars is more stretched," Francois Perol, head of the French Banking Federation told Les Echos newspaper.

Moody's said in a report on Thursday that French banks, because of their global reach, were more vulnerable to liquidity issues than their European counterparts.

Many US money market funds have reduced their exposure to European banks as sovereign debt problems in the eurozone have worsened, Moody's said.

The agency said that unlike banks that can rely heavily on deposits for cash, some French lenders have great needs for financing in dollars.

Ariane Obolensky, chief executive of the banking federation, said that dealing in the dollar lending market was harder for French banks but that there was no need to worry.

"It's more expensive" and for less time, she said regarding banks' liquidity loans in dollars.

She denied however that lending between banks was under duress even though official data showed that eurozone banks deposited the biggest amount of overnight funds at the European Central Bank so far this year on Friday.

The level of these deposits at the central bank is an indicator of the reluctance of banks to lend to each other on the pivotal interbank market.

© 2011 AFP

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