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We already knew that European banks and French banks in particular had trouble accessing US money markets. But now, an anonymous  executive in France’s largest bank, BNP Paribas, admitted that the bank has no access to dollars. Quite worrying.

Shares of BNP Paribas continue their downward spiral once again, and lose another 9%. Other French banks such as Societe Generale and Credit Agricole are following suit. This weighs on the euro once again. The French government could bail out its banks in the next few days. Will France remain AAA?

So how is BNP Pariabas operating these? Creating a market in euros, as the executive explains in the WSJ:

Since we don’t have access to dollars anymore, we’re creating a market in euros. This is a first. . . . we hope it will work, otherwise the downward spiral will be hell. We will no longer be trusted at all and no one will lend to us anymore.

The bank denies it has such problems.


French banks have the highest exposure to Greek debt, and also a considerable exposure to Spanish and Italian debt. Another worrying thing, is that these banks are highly leveraged. Societe Generale has a leverage close to Lehman before the collapse: 28:1 for SocGen versus 31:1 for Lehman Brothers according to the French bank’s official numbers.

The head of the IMF, Christine Lagarde, also from France, put the writing on the wall and said in several occasions that the European banking system is in urgent need for fresh capital.

Her comments were dismissed over and over again. Perhaps the French government is already working on a bailout plan?

BNP Paribas and Societe Generale already published  extraordinary statements in order to try to calm the markets. Apparently, this had little success.

EUR/USD is trading lower but within range, at around 1.36, between the 1.3570 and 1.3630 lines. Important resistance is at 1.37, while critical support sits at 1.3440. For more on the euro, see the euro dollar forecast.

The euro enjoyed some hope on recycled Chinese promises to aid Italy.