Euro Exchange Rate Outlook : The French government shoved €10.5 billion of its €40 billion rescue plan down the throats of the 6 biggest French banks today, a bit like food down the gullet of a goose. Until the government forced the issue, French banks were unwilling to tap the government fund in case it made them look weak. The stocks of all the banks rose on the announcement that Credit Agricole will get €3 billion, BNP Paribas will get €2.55 billion, SocGen will get €1.7 billion, and so on.
It’s interesting that the form of the capital injection is not preferred shares, as elsewhere, but subordinated loans at the base rate plus 400 bp. According to the FT, “the loans are repayable after other debts have been met, do not dilute existing shareholders and do not require a change in dividend policy. Nevertheless, subordinated debt can nonetheless be used to increase the banks’ tier one capital ratios, a main measure of balance sheet strength.
The Euro exchange rate today is still very weak as a result and the pounds to euros exchange rate is currently 1.2900
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Barbara Rockefeller
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