France threatens to seize banks, German bail-outs escalate

The Telegraph ^ | 11/3/2008 | Ambrose Evans-Pritchard

[bruinbirdman]

The French state has threatened to seize control of the country's banks and fire top staff unless they do their part to stabilise the economy by stepping up lending to companies in need.

"The banks have got to open up credit to business: they have the means to do it," said prime minister Francois Fillon, accusing lenders of hoarding cash. "We don't think the banks are stepping up to task as necessary. We can withdraw the credit that we have extended to them under the state's contract with the banks, and that will put them in difficulty. At that moment the question arises whether we should take an equity stake, change their managers, and assume control over their strategy."

Speaking on French television, he warned: "Broadly speaking, we'll be able to judge over the next 10 days whether they are playing the game as they should, or not."

Under last month's rescue deal, banks agreed to raise lending to firms and households by 3pc to 4pc in exchange for a state injection of €10bn (£8bn) in fresh capital for the six largest banks, a modest sum compared to the bail-outs in Britain, Germany, Belgium and the Netherlands.

In Germany, HSH Nordbank – 59pc owned by the city of Hamburg and state of Schleswig-Holstein – rattled the markets yesterday by revealing that it would need €30bn in guarantees from Berlin's €500bn stabilisation fund. It warned that further sums may be need`ed to meet capital adequacy ratios in the future.

"We are not under time pressure and will be holding in-depth discussions with our stockholders as to the strategy to pursue,'' said Hans Berger, chief executive officer. The bank has had to write down €2.3bn over the last year, and suffered heavy losses from the collapse of Lehman Brothers.

Commerzbank said it

[genghis]

ya governments telling private firms what they can do is hugely helpful in the generation of wealth(sarc)