Bloomberg News

Credit Agricole Said to Reach Accord on Greek ELA Funds

June 08, 2012

Credit Agricole Said to Reach Accord on Greek Emergency Funds

Credit Agricole is seeking to curb risks on Emporiki’s 22.9 billion-euro loan book amid escalating concern Greece will leave the euro area. Photographer: Kostas Tsironis/Bloomberg

Credit Agricole SA (ACA), the foreign bank with the biggest risks in Greece, reached an accord with Greek authorities that will let its unit in the country access emergency funding should the need arise, two people with knowledge of the matter said.

Emporiki Bank, the Greek unit of Credit Agricole, will be able to tap so-called Emergency Liquidity Assistance from Greece’s central bank under certain conditions, the people said, declining to be identified because the matter is private. Access will probably be restricted to situations where deposits are declining, the people said. Greek banks without a foreign parent already use the facility.

“This takes away risk from the French parent company,” said Jerome Forneris, who helps manage $8.5 billion at Banque Martin Maurel in Marseille and owns shares in Credit Agricole. If there ever is a deposit run in Greece, the central bank would provide the funding necessary to keep the unit running.”

Credit Agricole closed little changed in Paris trading at 3.15 euros, after rebounding from a decline of as much as 3.5 percent. The shares plunged 69 percent over the past 12 months, compared with the 31 percent decline in the Bloomberg Europe Banks and Financial Services Index.

Credit Agricole is seeking to curb risks on Emporiki’s 22.9 billion-euro ($28.5 billion) loan book amid escalating concern Greece will leave the euro area. The nation will go to the polls for the second time in six weeks on June 17 after no party got enough support to form a government in elections on May 6.

Reducing Funding

Under ELA, the euro area’s 17 national central banks are able to provide emergency liquidity to banks that can’t put up collateral acceptable to the European Central Bank. The risk is borne by the central bank in question, ensuring any losses stay within the country concerned and aren’t shared across all euro members, known as the euro system.

The impact on Credit Agricole from a Greek exit may reach 6 billion euros, Citigroup Inc. analysts Kinner Lakhani and Florent Nitu estimated on May 17. That compares with about 500 million euros for Societe Generale SA, the other French bank with a Greek consumer-lending unit, the analysts said.

Credit Agricole and Societe Generale spokespersons declined to comment, as did a Bank of Greece official.

ELA Request

Jean-Paul Chifflet, Credit Agricole’s chief executive officer, said on May 22 that his bank renewed a request for access to ELA funding with the Bank of Greece’s governor. France’s third-largest bank “can’t increase significantly” exposures to Greece, Chifflet told investors last month at the company’s annual general meeting. Emporiki’s loans exceed deposits, requiring Credit Agricole to provide cross-border funding to help fill the gap.

Credit Agricole reduced that funding to Athens-based Emporiki to 4.6 billion euros at the end of March from 5.5 billion euros in December, partly as deposits rose, the bank said May 11. Credit Agricole also tapped 1.6 billion euros of ECB funding for Emporiki at the end of March.

Emporiki might potentially receive about 3 billion euros from the Bank of Greece’s emergency liquidity program, Chifflet said on May 11, when the company, based near Paris, reported first-quarter results.

Societe Generale (GLE), France’s second-largest bank by market value, had 2.47 billion euros of loans and 1.94 billion euros of deposits at its Athens-based unit, Geniki Bank SA, by the end of March, it said May 3. Societe Generale’s cross-border funding to its Greek division represents about 200 million euros, the Citigroup analysts estimated.

To contact the reporters on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net; Jacqueline Simmons in Paris at jackiem@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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