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French banks manage stress tests

French banks BNP Paribas, SocGen, Credit Agricole and BPCE, parent company Natixis, have passed the stress tests conducted by European authorities said on Friday the Bank of France.

In a statement, the regulator said that following the test on a scenario of economic decline worse than expected and a new crisis on the European sovereign debt, the four French banks show a ratio of Tier One financial solvency through 9 3% at end 2011.

In this scenario, which holds a particular hypothesis of two years of recession in the euro area in 2010 and 2011, European regulators demanded that they tested 91 European banks show a ratio of at least 6%.

"This is a satisfactory result, not surprisingly, is quite comforting," said Christian Noyer, Governor of the Bank of France at a press briefing.

Christian Noyer, who is also member of the Governing Council of the European Central Bank, said that the total exposure of the four French banks, European sovereign debt amounted to 240 billion euros at end-March, which accounted for 43 billion in their "trading book" (portfolio of financial assets).

He also explained that a risk of default on sovereign debt of a sovereign state had been excluded from testing scenarios.

To restore investor confidence, the European Union 91 European banks submitted to stress tests to ensure that their capital was adequate to cope with a worsening economic conditions and financial market shocks.

Led by the Committee of European Banking Supervisors (CEBS) and drawing lessons from the debt crisis of Greek, tests have included discounts which reduce the market value of some bonds.

Fears of contagion in Europe of the fiscal crisis of Greece has weighed heavily in recent months on financial stocks.

The sector index Stoxx 600 European banks yields almost 5% since the beginning of the year.