–Adds Comments On Basel III, French Lending Conditions

PARIS (MNI) – Financing conditions in France are very favorable,
but interest rates will not remain at historical lows forever, European
Central Bank Governing Council member Christian Noyer said Friday.

Lending rates in France are “particularly low” thanks to the narrow
margins of banks, the governor of the Bank of France told reporters at a
press conference on lending conditions here.

The ECB has held its rates low and assured — “thanks to our
various interventions” — that low levels are passed on to all market
sectors, Noyer reminded.

“We are at such low levels that you can well imagine that this
won’t remain so eternally,” he said. “But it facilitates the relaunch of
the economy [and] the acceleration of growth in very good conditions.”

While bank lending to firms in August was only 0.4% higher on the
year, borrowing from the bond market showed a 10.2% annual increase,
despite the fact that firms need less cash advances, thanks to lower
inventory levels and the reduction in payment delays decided by the
government, Noyer noted.

For small business alone, the annual rise in credits through August
was 4.0%, Noyer said. Moreover, bank loans available to small business
once activity picks up more have increased by 12%, he said. “The
financial capacities are there.”

“Today, the situation of financing for the economy, in particular
the financing of business, is good,” Noyer concluded.

Responding to criticism from the general director of Societe
Generale, Frederic Oudea, that the new Basel III credit ratio targets
were too rigid and that “one single rule makes no sense at all” for the
different types of banks in the world, Noyer noted that there was
already great flexibility under the Basel II rules for regulators to
adjust requirements according to the level of risk.

“My feeling is that we will continue to do that,” the central
banker said. “One cannot deduce that everyone should do the same thing.”

French Finance Minister Christine Lagarde, who hosted the press
conference, said the government would maintain its role as “mediator”
between banks and small companies through 2012 to assure the access to
credit. She said this assistance had so far rescued or protected 12,000
small firms and 220,000 jobs.

Government credit guarantees for small firms will continue at a
gradually smaller level through mid-2011, after which private credit
insurance firms should resume their function, she added.

–Paris newsroom +331 4271 5540; stephen@marketnews.com

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