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French lenders to merge

FRENCH Finance Minister Christine Lagarde yesterday confirmed the merger of French banks Caisse d'Epargne and Banques Populaires and said that the state is ready to inject up to 5 billion euros (US$6.3 billion) into the new group, Bloomberg News reported.

Amid turmoil in the banking sector, both banks announced in October their intention to combine into one of France's biggest banking groups, with a total 480 billion euros in savings deposits and more than 6 million customers.

Both banks, which are customer-owned and do not publicly trade, have government representatives on their boards.

Lagarde yesterday called the merger "an intelligent marriage" and said a body would be created to manage the merger. Speaking on Europe-1 radio, she said discussions "in the coming days" would determine what role the state would have in the new structure.

She said it could involve between 2.5 billion euros and 5 billion euros in new government money, in the form of supplementary loans convertible into shares at maturity.

"When we put public money in a banking network, we want to know the way it evolves," she said, adding that the government would keep a presence on the new bank's board.

The long-considered merger was sped up because of the financial crisis. Confidence in Caisse d'Epargne and Banque Populaire has wilted amid troubles at Natixis, the investment bank the two jointly run. Natixis has been among those hardest hit in France by the meltdown in United States subprime mortgage markets.


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