France sets ceiling for bank exposure to corporate debt

A government financial watchdog has announced the top six banks in France must from July limit their exposure to indebted companies at five percent of their capital, in a move aimed at slowing what has become record-level borrowing by French businesses

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France’s six biggest banks must limit their exposure to highly indebted French companies under a new rule effective from July, the country’s financial stability council said on Friday, reports Reuters.

The High Council for Financial Stability, headed by the finance minister and which also includes the central bank governor, has been concerned about surging corporate debt levels.

In December, it announced banks would have to cap their exposure to the most indebted companies at five percent of their capital, once details had been hammered out.

On Friday, the council said BNP Paribas, Société Generale, Crédit Agricole, Crédit Mutuel, BPCE and La Banque Postale would be subject to the new limit from July for two years, which could then be renewed.

It added that other EU countries were expected to impose the limit on French companies, a move aimed at preventing firms from simply turning to other European banks for credit.

French corporate debt has hit record levels as big firms with easy access to bond markets have binged on cheap credit to finance investments and foreign takeovers.

Central bank governor François Villeroy de Galhau has repeatedly warned that if borrowing did not slow the council would consider additional credit curbs at its next meeting in June.

Read more of this report from Reuters.

 

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