PARIS (Reuters) - France’s rescue of mortgage lender Credit Immobilier de France guarantees its assets up to a ceiling of more than 20 billion euros (15.88 billion pounds), a source familiar with the matter said on Sunday.
CIF, a lender with 33 billion euros in assets whose already tenuous funding situation worsened after Moody’s Investors Service last week cut its credit rating, sought a government rescue late on Friday after a months-long search for a buyer ended in failure.
The guarantee, subject to approval by the European Commission, is the second such rescue the French government has had to arrange in recent months. France and Belgium jointly intervened last October to rescue Dexia DEXI.BR bank and are still hashing out their respective burdens from the rescue.
The source also said CIF would stop making new loans.
“The bank cannot grant new loans, it’s a condition of the state guarantee,” the source told Reuters. “Without a buyer, the bank lacks the solid base which would allow it to access liquidity.”
That suggests that the lender is likely to be wound down and that months-long efforts to find a buyer for CIF would be definitively abandoned.
Asked about the rescue, French Prime Minister Jean-Marc Ayrault said in a radio interview that the French financial system was “solid overall but there are a certain number of banks and institutions which present problems,” mentioning CIF and Dexia.
“As for CIF, it’s very important because it finances housing,” he said, adding that the government is determined that outgoing CEO Claude Sadoun be barred from collecting any kind of severance package.
“That would be deeply scandalous,” he said.
Ayrault also insisted that the rescue would not end up costing French taxpayers money.
CIF came under growing pressure from a liquidity standpoint in recent days, but also faced an uphill battle to refinance a 1.75 billion euro covered bond that was slated to expire in early October.
On Tuesday, Moody’s cut CIF’s credit rating, citing what it said was an increasing probability that the banking group would be placed into a “run-off” scenario rather than being rescued as a going concern, raising risks for its creditors.
($1 = 0.7933 Euro)
Writing by Christian Plumb, editing by Gary Crosse