Wednesday 21 February 2018

French banks quizzed on plans if Le Pen wins in presidential election

Marine Le Pen
Marine Le Pen

Julien Ponthus and Leigh Thomas

regulators and investors are asking French banks about their preparations for any market ructions - from bank runs to credit crunches - that might be caused by Marine Le Pen faring better than expected in the presidential election.

Far-right leader Le Pen has said that if she becomes president she would call a referendum on ditching the euro, finance state spending through central bank money-printing, force commercial banks to lend to small firms and halve the maximum rates that banks can charge clients.

Opinion polls indicate she has a good chance of coming out on top of the first round of voting on April 23, with her share of the vote projected at 25pc to 30pc. But they see her losing to centrist Emmanuel Macron in a May 7 run-off.

Regulators and investors are unwilling to rule out any surprises following the Brexit and US presidential votes last year which confounded pollsters' expectations. After French bond yields spiked in February on poll gains by Le Pen, ECB supervisors have sought to ensure banks have fully sized up the risks of the unexpected, four senior bankers told Reuters, speaking on condition of anonymity due to the political sensitivity of the matter.

"We've been asked what's our plans for different scenarios including Frexit (France exiting the euro)," one of the bankers said.

The ECB declined to comment.

One scenario lenders have been asked about is the possibility of Le Pen scoring higher than predicted in the first round, increasing her chances of winning a runoff two weeks later.

"For a fortnight we'd be absolutely fine to get through any difficulties," said a second banking executive, speaking about a possible short-term liquidity squeeze in credit markets.

The industry could easily weather a bout of brief volatility, the banker added.

Banks are taking the requests in their stride since ECB officials are including the questions in their regular surveillance checks, rather than asking them to separately compile and submit detailed plans.

The lenders are also having to outline their preparations to foreign investors, sources said. In some cases they have had to explain how the election process works.

"Foreign investors are asking a lot of questions. We have to keep explaining that there are two rounds," said a third senior executive at French bank. (Reuters)

Irish Independent

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