SocGen, BNP Win Capital Break as France Cuts Buffers to Zero
SocGen, BNP Win Capital Break as France Cuts Buffers to Zero
(Bloomberg) -- France helped banks including Societe Generale SA and BNP Paribas SA respond to the growing coronavirus crisis by eliminating a key capital requirement as the nation seeks to keep credit flowing to the economy.
Banks will be able to access money they have built up in so-called countercyclical capital buffers -- meant to strengthen lenders during good times for a downturn -- after France cut the requirement to 0% of risk-weighted assets from 0.25%, government officials said late on Wednesday. That will free up about 8 billion euros ($8.7 billion) of capital for French banks.
After repeatedly raising financial strength requirements since the financial crisis, regulators are now loosening controls to help protect economies as the outbreak brings many businesses to a standstill. France followed an identical move by Germany earlier in the day after it freed up 5 billion euros of capital by cutting buffers to zero, giving greater flexibility to lenders including Deutsche Bank and Commerzbank.
“We have decided to completely release the counter-cyclical buffer,” Finance and Economy Minister Bruno Le Maire told reporters. “We are making very radical choices. We aren’t suspending, we are bringing the buffer to zero.”
Switzerland’s central bank also said on Thursday that it’s considering whether to trim countercyclical buffers for the nation’s lenders.
French banks were among European lenders who had presented their regulators with a long list of demands last week to help them weather the fallout from the virus. The European Central Bank also loosened several capital demands on Thursday and nudged national authorities to follow suit on their own requirements.
Regulators are also weighing other options to offset the pain and keep credit flowing to the economy, eager to avoid a seize up of funding. European officials are considering giving the continent’s banks more time before they have to set aside billions of euros for bad loans, people with knowledge of the matter said on Wednesday. That option is one of several measures being discussed to soften the blow from new accounting standards and avoid ripping a hole in the balance sheets of banks, the people said.
The relief is particularly important in France because the nation had been expecting to increase the counter-cyclical buffers next month to 0.5% of risk-weighted assets. France’s Haute Conseil de Stabilite Financiere -- which is tasked with supervising the nation’s financial system -- said as part of its announcement that banks should have a “responsible attitude” on dividend and bonus payments.
France will also guarantee up to 300 billion euros of bank loans to companies in an effort to bolster firms threatened by the outbreak, President Emmanuel Macron said on Monday. The government will also allow companies to delay paying their taxes and social security contributions and provide support to help them delay loan payments, he said.
Credit Agricole and SocGen shares have fallen more than 50% since a global equities selloff began in mid-February, putting them among the 10 biggest decliners in the Stoxx Europe Banks Index. BNP Paribas SA has fallen 49% since Feb. 20.
The HCSF, as the regulator is known, said it stands ready to take any measure which are part of its missions and necessary to guarantee financial stability in a coordinated way with national and European supervisors and authorities.
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