French Banks Resume Tumble After ECB Announces One Bank Taps Dollar Swap Line For $500 MM Again
The French bank trio is once again on the ropes, with BNP leading the decliners at -5%, following the latest weekly Fed swap line release update from the ECB according to which one bank had subscribed for $500 million of dollars at emergency funding, confirming that anything coming out of the Libor market (where the average rate increased once again from 0.355% to 0.356% for the nth day in a row) is pretty much irrelevant as no real dollar access is available at rates below the ECB's penalty rate which this week was 1.07%. The good news: this is not as bad as last week's two banks which needed $575 million. The bad news: we have reverted to the regime from a month ago when a bank, most likely the same bank, was forced to borrow from the ECB, and hence, from the Fed. Said otherwise, there has been no improvement in interbank liquidity conditions since August 17. Expect more weakness out of French banks especially if China steps up the war of rhetoric and announces that more (of its own massively levered) banks have cut liquidity connections with France.
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