France Unveils Bank Rescue Plan

Under criticism even before it acted, the government Friday unveiled a plan to bail out Credit Lyonnais, Europe’s largest bank, from losses of roughly $10 billion blamed on mismanagement and risky loans.

Finance Minister Edmond Alphandery said the government would give the 132-year-old state-run bank five years to “shake off the burden of past losses” and prove itself successful enough to survive without government help.

“I’m confident in the ability and determination of this great company to get there,” he said.

The bailout plan, largely leaked to the press in advance, involves selling off about $26 billion of the bank’s assets - mostly non-banking enterprises.

Alphandery indicated the bank’s 1994 losses, to be announced next week, would total about 12 billion francs or $2.4 billion at current exchange rates, higher than the widely anticipated figure of 10 billion francs and well above the 6.9 billion franc loss of 1993.

Coinciding with Alphandery’s press conference, the bank announced a “particularly rigorous” four-year austerity program, consolidating operations around its core banking activities and trying to improve productivity.

Credit Lyonnais president Jean Peyrelevade, appointed two years ago to clean up the mess, said the program would eliminate 1,500 of the bank’s 38,000 staff positions by the spring of 1996. He denied union claims that 7,000 posts would be cut.

Alphandery said the conservative government was confident the bailout plan would cost taxpayers nothing. Several Parliament members have questioned this pledge and urged hearings.

Detailing the plan, Alphandery said selected assets would be placed with a semi-independent consortium, then sold off over a period of years. The target is to sell 80 percent of the designated holdings within five years.

Assets to be sold include the bank’s real estate portfolio, the Metro-Goldwyn-Mayer movie studio, most of the bank’s industrial holdings and its financial subsidiaries - including Altus Finance, Societe de Banque Occidentale and Banque Colbert.

Late Friday, court officials said a criminal investigation had been opened into alleged fraud in business and real estate deals involving Altus.

Credit Lyonnais officials said the asset sales would effectively eliminate the bank’s extensive retail banking network in Latin America and Africa. The bank intends to keep its Credit Lyonnais USA operation and will remain active in Asia.