Brussels, 22/01/2003 (Agence Europe) - The Commission has requested the phasing out of the guarantee which the state bank Caisse des Dépôts et Consignations (CDC) extends to its subsidiary CDC IXIS. The French Authorities have already agreed that the guarantee will be abolished after a transitional period. France had already agreed to abandon this guarantee. The Commission has asked France to present a precise timetable with a maximum deadline of two months.
CDC IXIS is an investment bank with extensive activities in international financial markets and does not provide any services of general interest. Other rating agencies aware of the advantages enjoyed by CDC therefor prompt them to lend more to CDC IXIS, where the conditions are better. The guarantee also covers financial liabilities represented by off balance sheet market operations may be relatively high, and far exceed what appears from the balance sheet. Should CDC IXIS be unable to honour its obligations at the defined date - CDC will step in to ensure that the debts of its subsidiary are duly paid. This encourages the rating agencies to attribute the top "AAA" rating to CDC IXIS. In turn the financial institutions take this into account when they trade with each other on financial markets influencing pricing, credit lines and credit risk in general. CDC IXIS therefore benefits from the advantageous conditions, to the detriment of other financial establishments. The Commission decision to get rid of this guarantee is part of an on-going process to eliminate State Aid that distorts the commercial markets. A similar decision was taken in 2001 to abolish state guarantees for Landesbanken and savings banks and a recommendation for eliminating state guarantees for Landeshypothekenbanken and savings banks has also recently been made.