THE European Commission, in agreeing major emergency aid for embattled French bank Credit Lyonnais, said yesterday that a survival plan would take "considerably" more subsidies than originally believed. Credit Lyonnais has a 53 per cent shareholding in Irish finance group Woodchester.
The move sanctioned 3.9 billion French francs (£483.4 million) in aid pending restructuring measures to be submitted by the French government.
The European Competition Commissioner, Mr Karel Van Miert, told a news conference however, that the new plan was unlikely to go through without
"real and substantive" divestments.
Credit Lyonnais, once the world's largest bank outside Japan, is already benefiting from a rescue plan worth a maximum Ffr45 billion which was cleared by the Commission in July last year.
Speaking in an unusually conciliatory tone, Mr Van Miert said that plan had failed to live up to expectations due to the lacklustre French market and the bank's poor image in public opinion.
He declined to say how much the French authorities might have to pay for another bailout, but said it would be a "considerable figure". EU rules allow for subsidies to be paid if they are limited to putting a company back on its feet without harming competition.
Asked whether the Commission would call for the early sale of Credit Lyonnais in return for further help, Mr Van Miert said it was no use pushing for the privatisation of the bank before it was made attractive again.
The emergency aid agreed yesterday included cancellation of the obligation put on Credit Lyonnais in 1995 to grant a loan below market rate to a state backed vehicle to which it transferred some Ffr130 billion of shaky assets. The interest on the loan was 85 per cent of what would have been the market rate.
The bank had said that it would lose Ffr3 billion in funding the loan this year, which analysts said could drag it into a Ffr2 billion half year loss.
Mr Van Miert said that, provided the French government formally notified the Commission quickly of the measures in the pipeline, the EU executive could take a decision on the new plan by the end of the year.
