BNP told to spend 2bn euros on bid for Paribas

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The Independent Online
FRANCE'S BANKING regulator yesterday dealt a blow to banking giant Banque Nationale de Paris' efforts to clinch its takeover bid for its two rivals Societe Generale and Paribas when it ordered the bank to set aside more than two billion euros to cover the costs of its twenty billion euros raised offer for Paribas.

The move adds to the pressure on the bank's regulatory capital ratios and will complicate the efforts of Michel Pebereau the BNP chairman to deliver on promises made last week of share buybacks should his bid succeed.

The provisions are to cover certificates of guaranteed value (CVGs) - a form of guarantee against future share price falls - which BNP is offering as an extra incentive to Paribas shareholders as part of its new offer for the bank.

The banking regulator, the CECEI, has insisted that the bank set aside not just the face value of the certificates, but provide against the worst case scenario of BNP having to pay out on certificates in full.

BNP, say analysts, still has the edge in the three way bank bid battle which has raged since March.

However, the demand for additional safeguards from BNP in return for rubber stamping its higher offer begs the question of whether BNP could afford to come back for a second time should Societe Generale again sweeten the terms of its agreed bid for Paribas. Following yesterday's decision by the French stockmarket regulator, the CMF to fix a provisional closing date of 30 July for both offers, Daniel Bouton, the chairman of Societe Generale said that a "higher bid can't be ruled out".