Head of BNP Paribas France undermines PS banking proposals

Earlier this week Arnaud Montebourg, contender in the French socialist party’s (PS) race to become presidential candidate, said the French state should run the banks and the government ban them from speculating.

Arnaud, who also described himself as “anti-globalisation”, later said in an interview with left-wing French paper La Libération that the banks should be “cut into little pieces”.

Francois Villeroy de Galhau, head of BNP Paribas’ France operations, responded in an interview with French radio station Radio Classique. He said separating banks’ functions into separate retail and investment banking entities would not provide a solution to the current banking crisis.

Villeroy de Galhau pointed to the bankruptcies of Northern Rock (a pure retail bank) and Lehman Brothers (a pure investment bank) in 2008, commenting that although these banks had just one function it did not prevent them from going bankrupt nor the ensuing financial crisis.

There is widespread speculation about the future of France’s investment banking industry should the PS get into power in May 2012.

This is a possibility as Nicolas Sarkozy’s approval ratings are consistently low. An Institut Francais de l’Opinion Publique (IFOP) poll in September for the weekly magazine Paris Match showed Sarkozy’s approval rating was just 37%.

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