PARIS (MNI) – The French government’s overhaul of the banking
system, to be submitted to the cabinet next month, foresees a separation
of speculative operations from retail activity and far-reaching
supervisory powers to wind down insolvent institutions, the French
business daily Les Echos reported Monday.
By next July, banks will have to offload to branches all operations
implying uncovered placement risks in hedge funds or capital investment
institutes, the newspaper said, citing a preliminary draft of the bill.
Exceptions are foreseen for market maintenance operations,
clients’ activities and own investment and cashflow. High-frequency
trading and speculation on agricultural products would be prohibited.
In the case of the resolution of a bank, the prudential control
authority ACP would have the power to dismiss directors, appoint a
temporary supervisor and terminate certain branch activities.
Interviewed by Les Echos, the president of the federation of French
banks (FBF), Jean-Paul Chifflet, warned against the unlimited collective
liability banks would carry for a bank undergoing resolution. “It’s a
terrible Damocles sword!” he said, demanding a ceiling for collectivized
risks.
For Chifflet, the reform would only add to the financial burden of
banks at a time when they must shoulder higher taxes and fulfill Basel
III liquidity requirements. Under such conditions, “it will become
difficult for French banks to do their job of financing the economy,” he
predicted.
–Paris newsroom +331 4271 5540; e-mail: ssandelius@marketnews.com
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