Bonus ban for French banks

FRENCH banks could face a ban on paying bonuses and dividends as part of a European recapitalisation programme, finance minister Francois Baroin said yesterday.

“The recapitalisation… will be done with the ban on dividends and bonuses under the supervision of the insurance and banking regulator,” said Baroin. “We have reached an agreement for the Eurozone last weekend.”

It was not clear how the bans will be enacted, but it is most likely that any lender deemed to have insufficient capital after a new round of stress tests will be forbidden from paying out rewards to staff or shareholders until it raises sufficient cash.

The country’s major lenders say they do not need to find any extra capital, but French Prime Minister Francois Fillon suggested yesterday that they will need to raise “in the order of €10bn (£8.7bn), in other words below their profits, which means that [they] can recapitalise without needing to ask for public aid.”

The estimate is above that of many analysts. Yesterday, analysts at Bank of America Merrill Lynch (BAML) produced a total capital-raising estimate of €3bn for major French banks.

Analyst Patrick Lerclerc said that Société Générale would need to raise €1.7bn, Crédit Agricole €1.3bn and BNP Paribas would not have to tap investors.