Thibault Camus, Associated Press
PARIS — French banks are ready to build up their rainy-day funds without help from public coffers, as part of a plan to dig Europe out of its debt crisis, the prime minister said Wednesday.
The recapitalization of the banks is one prong in a three-part plan to reassure investors that larger European countries wouldn't fall into the same debt hole that has already sucked in Greece, Portugal and Ireland.
The plan also greatly increases the firepower of a bailout fund and slashes the amount Greece has to pay back on its debts.
Since cutting Greece's debts could destabilize European banks — which hold a significant number of Greek bonds — leaders wanted to ensure they were prepared to weather the losses. To that end, the banks have to increase their ratio of good capital to risky investments to 9 percent by June.
At a meeting with executives from the country's largest banks, including Societe Generale, BNP Paribas, and Credit Agricole, French Prime Minister Francois Fillon said that the institutions would use their profits to increase the good capital they keep on hand — rather than ask for a help from the state.
The banks have to submit a plan to recapitalize by Dec. 15.
He also warned the banks not to pull back on loans to businesses — which could thrust the economy back into recession.
Amid worsening economic conditions and a volatile market that has seen several runs on bank stocks, there had been concerns the banks would need public financing.
That, in turn, worried some investors that the cost could trigger a credit downgrade for the government's debt. The amount France has to pay to borrow money from markets has soared in recent days.
A French downgrade would sap financial firepower from the continent's bailout fund, the European Financial Stability Facility, whose own strong AAA rating is dependent on the ratings of France and Germany. Without the highest rating, the fund would likely need more guarantees — and several countries have already said they don't want to pour more money into it.
Fillon's statement appeared to be an attempt to calm markets already in turmoil after the Greek prime minister threw the whole rescue plan into question when he announced that Greek voters would have a chance to approve — or reject — it in a referendum. Stocks have been in a freefall since the Monday announcement.
As several irate European leaders have pointed out since then, Fillon insisted the rescue plan agreed at a summit just over a week ago was the only way forward.
"The Oct. 27 accord remains our common roadmap and must be put into place as soon as possible," he said.
Amid a swelling of public anger at banks — particularly in the U.S., where protesters have taken to the street across the country in the Occupy Wall Street movement — Fillon also asked the governor of the Banque de France, Christian Noyer, to monitor the banks' year-end bonuses.
Two years ago, France put in place rules that require at least half of bonuses to be paid out over several years in order to better link the compensation with long-term profits.
Fillon said he thought bonuses would be significantly lower this year.
- Live at the GOP convention: Donald Trump...
- Cruz: Not supporting candidate who wages...
- Rupert Murdoch vows Fox News without Ailes is...
- NBA moving All-Star Game out of Charlotte,...
- Kaine emerges as a favorite in Clinton's VP...
- Hundreds of demonstrators gather on...
- Fox needs to find a successor to man who...
- Brazil nabs 10 IS backers in Olympics...
- Utah delegates finally stand and cheer... 93
- Obama rejects Trump depiction of US in... 41
- The day after: Lee defends Cruz at GOP... 32
- Police give all-clear in Munich... 31
- Dems' division, emails roil party on... 28
- In wake of email hack, Democratic chair... 23
- Daughter Ivanka Trump raises issues... 21
- NBA moving All-Star Game out of... 20