Hollande unveils softened French bank reform



REUTERS

Published — Thursday 20 December 2012

Last update 19 December 2012 10:33 pm

| نسخة PDF Print News | A A

PARIS: France unveiled a long-awaited bank reform, hailing it as a model for the rest of Europe even as critics said it fell short of President Francois Hollande’s campaign pledge to get tough with the financial sector.
The overhaul — which asks banks to house their proprietary trading units in separate, self-funded entities — will leave most of French lenders’ investment banking activities untouched, ha n ding a victory to BNP Paribas, Societe Generale and other banks, after months of intense lobbying.
It is closer in spirit to the US “Volcker Rule” — a complex attempt at cracking down on banks’ prop trading — than the more radical UK reform recommended by the Vickers Commission aimed at getting banks to shield retail activities to avoid a repeat of the 2008 financial crisis.
By keeping French banks’ combined model of commercial and investment banking intact, the government has tilted the law’s balance in favor of keeping credit flowing to the stagnant French economy as opposed to stringent financial regulation.
“I did not want to weaken the French banking system. I want it to be strong,” said French Finance Minister Pierre Moscovici.
He told a news conference the plan could even point the way for similar laws elsewhere in Europe, adding that Germany was also considering a similar reform.
Bank of France head Christian Noyer, speaking late on Tuesday, defended the plan, calling it “optimal” for France’s economy, which has been stagnating in recent quarters and may end the year in decline, recent figures suggest.
The French Bank Federation said the reform would “create additional costs” that would make it more difficult to lend, saying banks were already under pressure to meet tougher post-crisis Basel III capital and liquidity requirements.
There was little market reaction, with BNP Paribas shares up 1.5 percent, Credit Agricole gaining 2.1 percent and Societe Generale 0.1 percent higher, compared with a 1.4 percent sectoral gain at 1600 GMT.
Under the terms of the draft law, banks will have to ring-fence proprietary trading activities in separate, self-funded entities by 2015, while sparing activities such as market-making, hedging and private-equity financing. Regulatory oversight of these activities will be ramped up.
The ring-fenced entities will be banned from high-frequency trading and commodity derivatives trading.
In principle, this is not far removed from recommendations made in October by a European Union advisory group led by Erkki Liikanen which called for the ring-fencing of a swathe of trading activities.
Still, critics say France’s reform defines prop trading so narrowly that it leaves much of the riskiness of banks intact, such as sizable derivatives portfolios and funding of risky investment vehicles.

“It’s ultimately a minimal reform, without much impact on banking activities and without major upheaval in the way they’re operated,” said Natixis analyst Alex Koagne.
Moscovici said the reform would affect 10 percent of big banks’ capital markets revenue.
“This is worse than a backtrack,” said Jerome Cazes, former head of Natixis credit-insurance unit Coface. “It is the minimum you can put in a law without blowing a raspberry to the public.”
BNP Paribas only derives about 1 percent of investment-banking revenues from proprietary trading, one of its top executives told reporters recently. It is likely some banks will decide to scrap these businesses entirely.
The reform also encompasses other measures including a fund to rescue ailing banks and guarantee their deposits which Moscovici said would rise to 10 billion euros ($ 13.21 billion) in 2020 from an initial 2 billion, as well as tougher enforcement powers and consumer protection.
It remains unclear whether disappointment among those looking for more radical reform from the Socialist government will translate into an organized backlash in parliament — which is due to debate the law early next year — or among the public.
That looks unlikely at a time when France is struggling with stagnant growth, an unemployment rate at its highest in 13 years and a pullback in bank credit as lenders across Europe slim down to meet incoming post-crisis Basel III capital requirements.
“We are in a phase of economic slowdown and anything that can be done to keep the flow of credit to companies is in line with the public interest,” said Philippe Marini, the center-right UMP party’s banking expert in the French Senate.
“Any new rules or split of activities that goes too far would likely have a harmful economic impact ... The Socialist government has come back down to earth.”
Socialist lawmakers and senators have defended the proposals, saying they will keep banks in line and protect taxpayers from the cost of bailing them out while, at the same time, protecting the stagnant economy from a body blow.
“We want an economy that works, that creates jobs and that has functioning companies,” said Socialist Senator Richard Yung. “We also want banks to do their job of lending to the economy.”

What's happening around Saudi Arabia

ALKHOBAR: A power failure at the King Fahd Causeway on Wednesday night resulted in a massive traffic congestion, even as officials failed to explain the cause of the snag, local media reported.A power outage for 74 minutes on the link between the Kin...
JEDDAH: A female Saudi lawyer was able to get a stay order on a ruling by the general court in Jeddah that awarded custody of a two-year-old girl to her father. She successfully argued to get the court order reversed that gave custody back to the mot...
JEDDAH: The Commission for the Promotion of Virtue and the Prevention of Vice (Haia) said that combating harassment cases is part of its responsibility to promote Islamic values and morals in society.“Those harassing women will be brought to book,” s...
RIYADH: A thick layer of sand covered the city’s skyline on Saturday with a heavy blanket of dust caused by strong winds hampering visibility and creating traffic snarls on busy roads.The traffic department advised motorists to drive slowly and exerc...
JEDDAH: More than 26 million Umrah pilgrims and worshippers visited the Grand Mosque during the month of Ramadan and in the first few days after Eid Al-Fitr, thanks to a smooth transport arrangement under the guidance of Makkah Gov. Prince Khaled Al-...
AL-AHSA: An outbreak of lumpy skin disease (LSD) has been discovered in cattle in Al-Ahsa which is an area with many cows. All necessary measures have been taken to protect the livestock, said Mahmoud Al-Shuaibi of the Agriculture Department in Al-Ah...
RIYADH: An architectural masterpiece — the King Abdul Aziz Historical Center (KAHC) — in Riyadh is a huge complex dedicated solely to collecting, preserving, promoting and showcasing the history and heritage of Saudi Arabia. The KAHC is a three milli...
RIYADH: The Saudi Blind Society (Kafif) has made all preparations for the three-day workshop for the blind to be held here next week and attended by delegates from various Asian countries.Mohammed bin Suleiman Al-Shuwaiman, Kafif director general, th...
JEDDAH: The number of Saudis who took early retirement schemes last year stood at 38,647, the General Organization for Social Insurance (GOSI) has said. The Eastern Provinces got the lion's share of disbursements for retirees, amounting to SR3.8 bill...
JEDDAH: Meat and poultry topped the list of food items seized by the Saudi Food and Drug Authority (SFDA) at the border crossings for violating the health standards in the last two months.Approximately 267,137 kg of unfit meat and poultry were reject...
JEDDAH: Many sponsors and workers of small companies are struggling to get a comparatively cheaper health cover for renewal of iqama (residential permit) as the insurance companies have stopped issuing the same.The passport department has made it com...
RIYADH: Police have detained 11 Indonesian nationals, who arrived in the holy city of Makkah for Umrah a few days back.The Indonesian Religious Affairs Ministry is working closely with the Indonesian Consulate in Jeddah to assist the group of citizen...
JEDDAH: The National Committee for Bakeries at the Council of Saudi Chambers (CSC) said this Haj season would see no shortage in supplies of bakery items.The committee said there was need to increase operational labor by about 20 percent.It confirmed...
JEDDAH: Maj. Gen. Ibrahim Al Hamzi, director general of prisons, has sacked Brig. Ahmad Al Shahrani, director of Jeddah prisons, after the case of a video clip about prisoners taking heroin went viral, according to local media.Quoting informed source...
JEDDAH: Makkah Gov. Prince Khaled Al-Faisal met with leaders of security forces in the region on Thursday to discuss future plans and mechanisms to limit infiltrators from entering the holy sites via land passageways during Haj.During the meeting, he...

Stay Connected

Facebook