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French banks succeed EU stress tests

07-24-2010 08:02 BJT

PARIS, July 23 (Xinhua) -- France's leading four banks are strong enough to face another potential crisis after passing with success Europe stress tests, Bank of France, the central bank, said on Friday.

The tested banks were BNP Paribas, Societe Generale, Credit Agricole and BPCE, the parent of investment bank Natixis.

Regulators tested the ability of 91 European banks to cope with recession and any eventual financial downturn after the Greek crisis hit markets across the bloc and on attempts to bolster investors' confidence in the eurozone.

The tests by the Committee of European Banking Supervisors ( CEBS) with national supervisory authorities tried banks in 20 European Union countries, totaling 65 percent of banking assets held in the bloc.

"Results confirm the robustness of the French banks which are the strongest in Europe. This result was not unexpected given the encouraging results obtained from stress tests regularly conducted in France and the recognized capacity of French banks to weather the recent financial crisis", the central bank said in a statement.

The bank said the tested four banks outlined "the excellent capacity of the French banking system to withstand stress."

Tested banks showed an average Tier 1 ratio of 9.3 percent in 2011 under a worst-case scenario, compared with 9.9 percent at the end of 2009, it added.

The Tier 1 ratio is a major scale to measure a bank's capital adequacy, consisting of equity, preferred shares and retained earnings. Regulators said banks needed a Tier I ratio of at least 6 percent to pass the test.

The strength of income, a low-risk structured domestic real estate exposures and diversified sovereign debt portfolios have driven higher French bank ratio and bolster their performance to withstand large shocks.

The test result showed that French banks "only suffer a limited shock" and "would have no problem financing the French economy even in conditions of severe stress," Christian Noyer, governor of the Bank of France and member of the European Central Bank governing council, said after the publication of the result.

Editor:Zhang Pengfei |Source: Xinhua

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