By Yali N’Diaye

WASHINGTON (MNI) – The European banking sector is as solid as
banking sectors in other regions — including the U.S. — European
Central Bank Governing Council member Christian Noyer said Friday,
estimating there no need for more long-term refinancing operations.

During a joint press conference following the meeting of G20
finance ministers and central bankers, French Finance Minister Francois
Baroin also argued against the IMF’s pessimistic view about France.

In fact, the IMF’s forecasts for France are “excessively
pessimistic,” Baroin said.

In its April World Economic Outlook, the IMF revised up its GDP
growth forecast to 0.5% in 2012 and left it unchanged at 1.0% in 2013.
The forecast for the euro zone is -0.3% this year and +0.9% next year.

Going forward, “We are more than confident” in France’s ability to
meet deficit targets, even after they were revised down to 4.4% of GDP
for this year from 4.5%, Baroin also said. He also expects 2013 deficit
targets to me met.

On the banking side, Noyer disagreed with the International
Monetary Fund’s view regarding French banks’ deleveraging.

Loans are not constrained from the supply side and when there are
loan restrictions, it is due to demand factors.

The reality is that French banks do not do deleveraging in France
and in the eurozone, although they have performed arbitrages and asset
reduction outside. “They have reduced activities in U.S. dollars as have
all banks in the world,” Noyer added.

“I see no reason why there would be a restriction of loan supply,”
he continued.

At the European level, “we know the parts of the banking sector
that are facing difficulties,” Noyer said, citing banks in Greece and
Spain in particular.

“The general pessimistic view about the banking sector in Europe
seems totally out of place to me,” he said.

“The European banking sector, except for these well identified
cases, is as solid as banking sectors of other regions, particularly the
U.S. banking sector,” Noyer argued.

This is especially true when taking into account the accounting or
prudential factors in Europe and in the U.S.

In fact, “there is no reason for more” LTROs, he said, noting the
two that were done fulfilled their role.

“We decided to do two” LTROs, Noyer said, which was announced. The
amount was unlimited and banks took what they needed to address their
particular funding needs. That being said, “we will see in the future if
something is needed.”

Noyer also said the criteria for core Tier 1 capital in the latest
U.S. bank stress tests was much less stringent than the European Banking
Authority stress test.

Both welcomed the increase of resources committed to the
International Monetary Fund, with Noyer pointing out it was a “real
progress” between Thursday evening and Friday morning. It shows a
“general desire” to strengthen the IMF’s resources as risks remain
important for the entire global economy.

In other comments, Baroin welcomed the widening of the Chinese
yuan’s trading band widening.

** MNI Washington Bureau: 202-371-2121 **

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