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Clash at France's Credit Mutuel heats up as part of group votes for autonomy
October 22, 2016 / 4:41 PM / 10 months ago

Clash at France's Credit Mutuel heats up as part of group votes for autonomy

PARIS (Reuters) - Credit Mutuel, France's third-biggest cooperative bank, said on Saturday it would examine the consequences of a possible divorce with a group of its regional banks, whose shareholders voted earlier to seek financial independence.

Credit Mutuel Arkea, which comprises regional banks in Western and Central France, as well as online bank Fortuneo, wants autonomy from its parent group in a long-standing standoff that is becoming a headache for regulators.

The cooperative Credit Mutuel, with a French retail market share of more than 15 percent, has a central body which is responsible for the solvency and liquidity of all regional entities, including that of Arkea.

The group has undertaken a reform of its organization that would make it compliant with regulatory rules. Credit Mutuel Arkea opposes the reform, which would make the governance and strategy-setting more centralized.

Credit Mutuel Arkea argues that there is a conflict of interest, as its regional banks compete on the same ground with other networks of the group, and wants to introduce a separate central body while staying in the group and keeping the brand unchanged.

The outcome of the dispute could put at stake the credit rating of Arkea, as the divorce could deprive it from the group's mutual financial support mechanism in a stress scenario.

The discussions are complicated by the fact that the creation of a new central body at a cooperative bank in France would require a special bill to be introduced by the government.

"The vote of our local banks ... confirms unequivocally the position that we have been defending for months, namely a legal recognition of a central body for Credit Mutuel Arkea," Jean-Pierre Denis, head of Credit Mutuel Arkea, said in a statement on Friday.

Confederation nationale du Credit Mutuel, an association which represents the group's interests and includes the central body, said on Saturday it took note of the vote, but rejected once again the proposal to create a separate entity.

It said that it still hoped that there was a chance to preserve the unity of the group. However, it added that it would carry out an independent study of consequences for a scenario when Credit Mutuel Arkea quits the group.

"In any case, two companies that proclaim to be competitors would not be able to operate under the same brand," it said.

Credit Mutuel Arkea had 110.1 billion euros (97.94 billion pounds) in assets as of end-2015, which represented around 15 percent of the group's total balance sheet. Its common equity tier 1 ratio stood at 15.3 percent at end-June 2016.

Reporting by Maya Nikolaeva; editing by Andrew Roche

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