French Banks Ready To Fail

The stock Market is not the only worry for the BNP Paribas.

The french bank BNP Paribas is taking radical steps to adapt to the economic and regulatory situation.

Interviewed recently, its Managing Director Baudoin Prot announced a write-down of 60% on Greek securities held (however he did say that Greece was not a problem in the past).
More surprising, BNP has implemented a programme for the massive transfer of government bonds held namely in countries such as Italy, Spain or Portugal, as a result generating a loss of 362 million Euros.

This raises two questions.
The first being who is going to buy these bonds that BNP no longer wants? The second question is why BNP in particular, but banks in general, continue to encourage their customers to invest massively in life insurance contracts in Euros even though the great majority are made up of more and more risky government bonds.

The bank reduces its own exposure to sovereign debt but not doesn’t reduce the exposure of private individuals.

Lastly, the follow-up of the strategy for reducing the size of the balance sheet (clearly BNP voluntarily reduces its volume of activity and commitments) includes a massive redundancy plan in the BFI (financing and investments banks) and this will certainly be the first of many which will affect French banks and others around the world in the next few months.

All of these actions have generated a quarterly fall in net profits of 71% . But as the same Baudoin Prot said a few weeks ago: “the only problem for BNP Paribas is its market price”.

Finally, you still need to bare in mind that the important essentials are not affected as the Managing Director declared that “nothing seems to indicate following a path cancelling shareholders’ dividends”.

Phew! I’m greatly reassured. Aren’t you?

Article by Charles Sannat
Director of Economic studies
AuCOFFRE.com

French banks “ready to fail” was first posted on November 7, 2011 at 9:22 am.
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