9 Oct 2008

French banks to merge

2:36 pm on 9 October 2008

Two banks in France are to merge. The Caisse d'Epargne bank approved plans on Wednesday to merge with Banque Populaire.

The tie-up would create the second biggest banking group in France with combined equity capital of 40 billion euros ($US55 billion).

Banque Populaire and Caisse d'Epargne are mutual banks, partly owned by their depositors. They already jointly control the investment bank Natixis, whose shares have been ravaged by the credit crunch.

The banks have been discussing a possible merger for two years but were forced into action by the financial meltdown that is rattling the European banking sector.

Their plans were given a push when BNP Paribas took control of the ailing finance group Fortis's operations in Belgium and Luxembourg, strengthening its position greatly.

Caisse d'Epargne has 27 million private account holders, mostly small-scale depositors.

Group chairman Nicolas Merindol said the bank's ratio of debt to deposits is one of the safest in Europe. He says it has opened 760,000 new savings accounts holding six billion euros since the start of the year.