Bloomberg News

French Banks Plan to Lend as Much as 10 Billion Euros to Cities

February 20, 2012

Feb. 20 (Bloomberg) -- French banks including BNP Paribas SA and Societe Generale SA plan to lend 9 billion euros ($11.9 billion) to 10 billion euros to the country’s municipalities this year, the French Banking Federation said.

The companies committed “to favor market access for local governments,” the banking association said today in an e-mailed statement.

Private French lenders pledged new loans to local governments after state-owned financial firms Caisse des Depots et Consignations and La Banque Postale on Feb. 10 confirmed they’ll join forces to create a new municipal bank.

France salvaged an original rescue deal for Dexia SA’s French municipal-lending business by agreeing to buy a direct 31.7 stake in a new entity owning Dexia Municipal Agency. Caisse des Depots will also own 31.7 percent and La Banque Postale will own 4.9 percent, Dexia, based in Paris and Brussels, said Feb. 10.

Selling the majority stake in Dexia Municipal Agency will cost Dexia SA about 1 billion euros, the company said. Dexia Municipal Agency, which had 63.4 billion euros of covered bonds outstanding at the end of June, will provide funding for the venture, Dexia said Feb. 10.

Dexia, once the world’s largest municipal lender, is being broken up after the European debt crisis reduced its ability to get funding. Belgium’s government took over the company’s Belgian banking unit in October.

--Editors: Stephen Taylor, Keith Campbell

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net


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