French Bankers Brace For Squeeze Ahead Of Results

By Lionel Laurent and Sophie Sassard

PARIS/LONDON, Oct 28 (Reuters) - French bankers are bracing themselves for a rough end to the year as job cuts, pressure on bonuses and a broad drive to slash costs cast a shadow over BNP Paribas and Societe Generale's upcoming quarterly results announcements.

French lenders have already announced sweeping asset sales and are now looking for additional measures to plug an estimated capital shortfall of 8.8 billion euros ($12.4 billion) without help from shareholders or the taxpayer.

Bankers, union sources and headhunters say this will inevitably lead to hundreds of job cuts at BNP and SocGen, with the burden falling largely on corporate and investment banking (CIB) and in particular asset financing.

Some say New York and London will be harder hit than Paris, where labour laws are stricter and layoffs more tightly regulated.

"We know that CIB will be hit hard," said a union representative at BNP, which is expected to give more details when it reports quarterly results on Nov. 3.

"The bank has said it is pulling out of some markets, some international platforms, New York, the Gulf, Asia...There's going to be an impact."

(Read on...)

Crisis Flames Lick At BNP Chief Pebereau's Legacy

By Lionel Laurent

PARIS | Thu Oct 27, 2011 6:54am EDT

(Reuters) - In the spring of 1999, Michel Pebereau, chief executive of Banque Nationale de Paris (BNP), gathered a dozen of his top bankers to propose an audacious plan to buy not one, but two rivals and create a French national champion.

It was a big gamble for the one-time top civil servant. Having overseen the state's sale of its stake in BNP (BNPP.PA), he now sensed an opportunity to create a dominant player by snapping up investment bank Paribas and retail rival Societe Generale (SOGN.PA).

"It was a race to be the biggest," recalled one of the bankers present at the meeting.

Pebereau failed to win SocGen, but he got Paribas.

This served as a springboard for BNP's ten-year transformation into one of the world's largest banks with assets of around 2 trillion euros ($2.7 trillion), equivalent to about a year of French GDP, and a reputation as a risk-averse sector monolith that emerged from the 2008 financial crisis virtually unscathed.

More than a decade on from that meeting, a euro zone debt crisis rages and the 69-year-old prepares to step down as chairman on December 1.

BNP's size and its business model are no longer perceived as ironclad. Its shares are trading at half their book value after heightened eurozone fears this summer forced French banks into announcing sweeping asset sales.

And the once-widespread view of Pebereau as a banking Midas has been undermined by the possibility that BNP and its peers could be forced to take state funds as part of a plan to shore up Europe's banks, as Greece threatens to lurch into default.

"BNP is like the Roman Empire. And the barbarians are at the gates," as one analyst puts it.

(Read on...)

Generali France Employee Arrested In Probe

(Fun little scoop!)

By Lionel Laurent and Nicolas Bertin

Paris | Tue Oct 11, 2011 11:49am EDT

Paris, Oct 11 (Reuters) -- Police have raided the French offices of Italian insurer Assicurazioni Generali and arrested one employee as part of an ongoing investigation into an alleged fraud, a company official said on Tuesday.

The employee, who worked in a back-office function, is suspected of being part of an alleged fraud ring that attempted to embezzle around 1.2 million euros ($1.64 million) of client funds, according to two sources familiar with the case.

Such developments are rare in the normally staid world of the French personal-insurance market, a 1.4 trillion-euro behemoth that remains a firm favourite with risk-averse savers thanks to its beneficial tax treatment.

Police arrested the Generali employee -- who has not been named -- at his home on Sept. 27 before they searched his workplace at the company's offices in the Paris suburb of Seine-Saint-Denis, according to Generali France's head of legal affairs, Michel Becker.

The alleged fraud itself dates back to 2009 and was rapidly detected by the company, which filed a complaint with the Paris prosecutor in August of that year, Becker said.

"The financial fraud squad began an investigation that led to the identification of a suspicious person among our employees," he said.

However, two sources familiar with the case said that so far up to three Generali employees had been placed under investigation as part of the probe, which had uncovered an alleged fraud ring of around 15 people.

The scheme had siphoned off 1.2 million euros of client funds but was intercepted as it attempted to move them to separate accounts and shell companies, the sources said.

Becker declined to comment on these details. He said the alleged fraud had had "no negative impact" on the company's clients.

A police spokeswoman declined to comment because the investigation was "ongoing".

SocGen CEO Frederic Oudea Tells Reuters Bank Recaps Won't Solve Crisis

(Click here to see my video interview with Frederic Oudea, Chief Executive of Societe Generale)

By Lionel Laurent

PARIS | Fri Oct 7, 2011 10:21am EDT

(Reuters) - A recapitalization of European banks is not needed and would not solve a crisis of confidence in the euro zone's ability to manage its sovereign debts, Societe Generale's chief executive told Reuters Insider TV on Friday.

Shares in France's second-largest bank have plunged nearly 50 percent over the last three months as concerns have grown about its financial strength, prompting it to announce a plan to cut costs and sell assets to free up 4 billion euros in capital.

Calling on euro zone leaders to sort out the unfolding Greek debt drama "as quickly as possible," Frederic Oudea said the main problem for banks was not one of capital but one of liquidity as funding-market confidence peels away.

French Mayors Rap Dexia "Trickery" As Rescue Brews

By Lionel Laurent

PARIS | Wed Oct 5, 2011 1:59pm EDT

Oct 5 (Reuters) - Dexia "tricked" French towns into taking out complex loans that saddled them with crippling interest payments, mayors told a parliamentary hearing on Wednesday, ahead of an expected break-up of the crisis-stricken bank.

With a restructuring plan for the lender expected as early as Thursday, following a pledge from Belgium and France to guarantee its financing in the face of a dramatic share-price slide, some local authorities said now was the time to bring the business of local-government lending under tight control.

Specifically, they advocate putting the state back in the driving seat and banning risky, variable-rate products.

Several mayors have sued Dexia over these so-called "toxic" loans, which they say were presented as "fixed" interest-rate products pegged to exchange rates such as the euro-Swiss franc.

When the new rates kicked in, the local authorities saw their 4-percent borrowing rates shoot up in some cases to 15, even 24 percent, the mayors told the hearing at France's National Assembly.

"Fixed rate, fixed rate, fixed rate -- every time the same words," said Xavier Martin-Le Chevalier, mayor of the northwestern town of Tregastel, holding up Dexia's marketing documents. "There was indeed serious trickery."

(Read on...)

France Eyes Mayor-Friendly Way Out Of Dexia Turmoil

By Lionel Laurent and Julien Ponthus

PARIS | Tue Oct 4, 2011 5:29pm BST

Oct 4 (Reuters) - A break-up of Dexia may not be what the Franco-Belgian bank's chief executive, Pierre Mariani, dreamed of when he took the reins three years ago, but it is one solution being pursued by his former boss: French President Nicolas Sarkozy.

France is in talks to restructure Dexia by breaking off the arm of the bank that lends to local governments and putting it back under the control of state bank Caisse des Depots -- where it was before the 1990s -- and state-owned Banque Postale, the banking unit of the French postal service.

At the heart of the plan is the Sarkozy administration's desire to safeguard the future financing of various French towns, municipalities and regions, many of which rely on Dexia and which would be in the firing line if the bank fell victim to a liquidity crunch.

The plan has been months in the making but Dexia's plummeting share price and a rapid deterioration in investor sentiment in the banking sector have dramatically ratcheted up the stakes.

"All of France's regional authorities borrow or have borrowed from Dexia or its predecessors...Dexia's situation and the conditions in which its employees work are crucial for these authorities," Philippe Marini, a senator from Sarkozy's centre-right UMP party, told Reuters on Tuesday.

(Read on...)

Trade Lobby Calls For Basel Banking Rule Exemptions

By Lionel Laurent

Oct 3 (Reuters) - Tougher Basel III capital adequacy rules for banks may be tweaked to grant an exemption to the "crucial" activity of trade finance, the International Chamber of Commerce (ICC) business lobbying group said on Monday.

The ICC has spent the past year trying to persuade the Basel rule-setting committee that the banks' role in keeping the wheels of global trade turning is too important to be stifled with the same requirements on solvency ratios as other lending activities.

Against the backdrop of a slowing global economy and the unfolding euro debt crisis, the ICC is hopeful there will be an exemption, its secretary-general told reporters at a briefing lunch in Paris.

"We are hoping, and certainly it's our expectation, that there will be (an exemption)," said Jean-Guy Carrier. "I think everyone will be seeing some light there."

(Read on...)